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Aliaxis

Annual Report 2004

Registered Office Aliaxis S.A. Avenue de Tervueren, 270 B-1150 Brussels, Belgium

Aliaxis - annual report 2004

Ta b l e o f C o n t e n t s

Table of Contents

Key Figures

Chairman’s Statement

Company Profile

Corporate Governance

Directors’ Report on the Consolidated Accounts

Introduction

Economic Environment and Key Features

Review of Business Activities

Research and Development

Environmental Review

Human Resources

Financial Review

Oulook for 2005 and Subsequent Events

Financial Data

Annual Report 2004

Consolidated Accounts

Auditor’s Report

Non-Consolidated Accounts and Profit Distribution

Aliaxis Companies Worldwide

Glossary of Key Terms and Ratios

No. Entreprise: 0860 005 067 Tel : +32 2 775 50 50 - Fax : +32 2 775 50 51 Web-site : www.aliaxis.com E-mail address: aliaxis@aliaxis.com

Key Figures

Aliaxis

Turnover * Operating Cash Flow * % of turnover Operating Income * % of turnover Net Profit (Group Share) * Net Current Profit (Group Share) * Net Current Cash Flow (Group Share) * Capital Expenditure * % of depreciation Capital and Reserves Net Financial Debt * Return on Capital Employed * Current Return on Equity (Group Share) * Average Number of Employees

Net Current Profit (Group Share) * Net Current Cash Flow (Group Share) * Net Profit (Group Share) * Gross Dividend Net Dividend Current Distribution Rate *

2004 € million

2003 € million

1,680 267 15.9% 199 11.8% 61 100 167 74 109% 574 659 14.1% 16.2% 11,610

1,612 247 15.3% 179 11.1% 43 80 148 58 85% 536 720 13.5% 16.8% 12,049

2004 € per share

2003 € per share

1.10 1.84 0.67 0.1467 0.11 13%

0.89 1.63 0.47 0.133 0.10 15%

Annual Report 2004

Aliaxis: a worldwide business… … with strong local brands

* Defined in Glossary on Page 50

Analysis of turnover By geographical Area Asia/Australasia: 9%

By Industrial Activity

agenda

Africa: 4% Other Building Products: 14%

South America: 1%

Other: 15%

F ir st ha lf 2 0 05 resu lts

- Wednesday 25 May 2005

- Board Meeting to approve results: September 2005

At the Group’s Registered Office, Avenue de Tervueren, 270,

- Press Announcement: September 2005

B-1150 Brussels, Belgium

Pressure Systems: 33%

North America: 31%

A nnua l Ge ne r a l Sha r e holde r s ’ Me e t ing

Full y e a r 2 0 05 resu lts

Europe: 55%

Gravity Systems: 38%

Pa y me nt of D i v ide nd

- Board Meeting to approve results: April 2006

- Friday 1 July 2005

- Press Announcement: April 2006

Realisation: Comfi&Publishing - 02/290 90 90

Key Figures

Aliaxis

Net Current Profit (Group Share) * Net Current Cash Flow (Group Share) * Net Profit (Group Share) * Gross Dividend Net Dividend Current Distribution Rate *

2004 € million

2003 € million

1,680 267 15.9% 199 11.8% 61 100 167 74 109% 574 659 14.1% 16.2% 11,610

1,612 247 15.3% 179 11.1% 43 80 148 58 85% 536 720 13.5% 16.8% 12,049

2004 € per share

2003 € per share

1.10 1.84 0.67 0.1467 0.11 13%

0.89 1.63 0.47 0.133 0.10 15%

Annual Report 2004

Aliaxis: a worldwide business… … with strong local brands

* Defined in Glossary on Page 50

Analysis of turnover By geographical Area Asia/Australasia: 9%

By Industrial Activity

agenda

Africa: 4% Other Building Products: 14%

South America: 1%

Other: 15%

F ir st ha lf 2 0 05 resu lts

- Wednesday 25 May 2005

- Board Meeting to approve results: September 2005

At the Group’s Registered Office, Avenue de Tervueren, 270,

- Press Announcement: September 2005

B-1150 Brussels, Belgium

Pressure Systems: 33%

North America: 31%

A nnua l Ge ne r a l Sha r e holde r s ’ Me e t ing

Full y e a r 2 0 05 resu lts

Europe: 55%

Gravity Systems: 38%

Pa y me nt of D i v ide nd

- Board Meeting to approve results: April 2006

- Friday 1 July 2005

- Press Announcement: April 2006

Realisation: Comfi&Publishing - 02/290 90 90

Aliaxis

Annual Report 2004

Registered Office Aliaxis S.A. Avenue de Tervueren, 270 B-1150 Brussels, Belgium

Aliaxis - annual report 2004

Ta b l e o f C o n t e n t s

Table of Contents

Key Figures

Chairman’s Statement

Company Profile

Corporate Governance

Directors’ Report on the Consolidated Accounts

Introduction

Economic Environment and Key Features

Review of Business Activities

Research and Development

Environmental Review

Human Resources

Financial Review

Oulook for 2005 and Subsequent Events

Financial Data

Annual Report 2004

Consolidated Accounts

Auditor’s Report

Non-Consolidated Accounts and Profit Distribution

Aliaxis Companies Worldwide

Glossary of Key Terms and Ratios

No. Entreprise: 0860 005 067 Tel : +32 2 775 50 50 - Fax : +32 2 775 50 51 Web-site : www.aliaxis.com E-mail address: aliaxis@aliaxis.com

Aliaxis

Annual Report 2004

C h a i rm a n ’s S t a t e m e n t

Overall, 2004 was a satisfactory year for Aliaxis, with most

pleased to note the number of products that have been

businesses in the Group achieving growth and trading

launched into new countries, thanks to the efforts made by

results that were better than planned. As a result, Aliaxis’

local Aliaxis companies in those countries to identify and

performance at the Group level was better than 2003 in

promote market opportunities. Such initiatives will help to

terms of both operating income and net profit.

further reinforce our worldwide presence and will be of long-term benefit to the Group.

Similarly we achieved our objective of continuing to reduce financial debt during the year, thanks mainly to cash flow

We expect the business environment in 2005 to remain

generated from the operations, and without the benefit in

challenging,

2004 of a significant contribution from business disposals.

uncertainties, both general and specific to our own industry.

with

many

geopolitical

and

economic

Nevertheless, the markets we serve remain fundamentally Our results were achieved despite a variable trading

attractive, and I am convinced that Aliaxis can benefit

environment, in which many of the markets where Aliaxis

thanks to its strong international positions and its ability to

is present, especially in the building sector, experienced

serve the needs of its customers. Our goal, therefore, is

favourable levels of activity, but at the same time where raw

to continue to ensure that Aliaxis remains well-placed to

material prices were very substantially higher and where

respond to those uncertainties and to be able to identify

the influences of greater global competition and customer

and seize business opportunities as they arise.

consolidation became more evident. As we go forward to meet the challenges that lie ahead, 2004 was also a year in which we devoted much time to

we must do so without the help of a valued member of the

continuing the integration of the Group and to identifying,

management team following the sudden death in February

prioritising and finding solutions to the challenges facing the

2005 of Tom Torokvei, Director of our North American

industry in general, and Aliaxis in particular. This was partly

operations. I know that the Executive Committee will miss

achieved by mobilising the resources of the Group through

his wisdom and experience, and equally I will miss the

a number of initiatives such as a Management Conference

advice and support of a trusted friend and colleague.

attended by over 100 of the Group’s senior managers, the initiation of several ad-hoc cross-organisational working

The progress made by Aliaxis during 2004 could not have

groups, and specific projects on a number of issues

been achieved without the dedication of all our employees

selected to accelerate the implementation of synergies

throughout the world, and I would like once again to thank

between Group companies and to improve Aliaxis’ position

them for their constant efforts on behalf of the Group, which

in its markets. I am confident that Aliaxis will be able to reap

are reflected in these results.

the benefits of these initiatives in the years to come. We also concentrated much effort on improving the business through the development of new products and markets, and the further enhancement of the comprehensive level of service we provide to our customers. A strong and consistent flow of new products is essential to secure the

Jean-Louis Piérard,

position of Aliaxis as a leader in its industry. The Review

Chairman and CEO.

of Business Activities later in this Annual Report includes special mention of just some of the many new products introduced by our businesses during 2004. I am also

p. 1

p. 2

Aliaxis

Annual Report 2004

Company Profile

Aliaxis, an international group of businesses with a

worldwide presence, is dedicated to the manufacture

and sale of plastic pipe systems and related building and

sanitary products used in residential and commercial

construction and renovation, as well as in a wide range of

industrial and public utility applications.

OUTLOOK

• Slowing of housing markets in some European

• Residential housing markets in North America remained

countries and in Australasia evident in the early

buoyant in the first quarter of 2005, but impact of any

part of 2005

government action to address the US trade deficit and weakness of the dollar are a concern

• Little sign of a sustained recovery in Germany • Continued strength of the Euro makes European export activity more difficult

• Outlook for raw material prices remains uncertain • Aliaxis priorities will remain focused on cash generation and performance improvement as well as the pursuit of selected development opportunities

p. 3

A worldwide presence EUROPE Austria: Glynwed - Marley Benelux: Akatherm - Arnomij - Glynwed Nicoll - Vigotec Central and Eastern Europe: Glynwed - Marley - Poliplast France: Friatec - Girpi - Glynwed Innoge - Nicoll - SAS Germany: Abuplast - Akatherm - Friatec Marley - Sanit채rtechnik - SED - VKP - Wefa Italy: AVF Astore - Europlast - FIP Glynwed - Nicoll - Redi Scandinavia: Glynwed Spain: GPS - Jimten - MASA - Riuvert Switzerland: Glynwed - Straub United Kingdom: Durapipe - GPS Greenwood - Hunter - Marley - Multikwik Stainless Fittings/Dairy Pipe Lines

Aliaxis: an international group Aliaxis, an international group of businesses with a

NORTH AMERICA Canada: Canplas - Hamilton Kent - Ipex USA: Canplas - Friatec - Harrington Ipex - Multi Fittings Mexico: Ipex

SOUTH AMERICA

worldwide presence, is dedicated to the manufacture and sale of plastic pipe systems and related building and sanitary products used in residential and commercial construction and renovation, as well as in a wide range of industrial and public utility applications. Aliaxis S.A. was created in 2003 through the demerger of all the plastics activities of the former Etex Group into a

Argentina: Nicoll Brazil: Glynwed Chile: Duratec Vinilit Peru: Nicoll

completely independent entity. Those plastics activities originated in 1980 and were subsequently developed both organically and by acquisition, most significantly of Marley plc in 1999 and Glynwed Pipe Systems in 2001. These strategic initiatives created the critical mass, profitability, strength

ASIA AND AUSTRALASIA Australia: Philmac New Zealand: Chemvin - Dynex - Marley China: Glynwed - Universal Hardware Zhongshan Malaysia: Glynwed - Paling Singapore: Glynwed Thailand: Glynwed

and diversity of business portfolio that, from the outset, has enabled Aliaxis to be a major force in its industry. The Aliaxis Group today employs 11,610 people, is present in 37 countries throughout the world, and comprises 86 manufacturing and trading companies, all of which have their own individual identities, trading styles and company logos which are well-known in their local markets.

AFRICA South Africa: Marley - Glynwed Rhine Ruhr

p. 4

Aliaxis

Annual Report 2004

The new Deepflow Plus gutter system from Marley Plumbing & Drainage (UK) includes the innovative Easyclip jointing system which simplifies assembly

and underground drainage, and surface drains and gullies for domestic and public utility applications. • Pressure Systems: complete systems of pipes, fittings and valves for the distribution under pressure of water and other fluids, compressed air and gas in residential, commercial, industrial and public utility applications. • Other Building Products: sanitary products for kitchen and bathroom applications such as WC cisterns, flushing mechanisms and shower heads, ventilation products such as extractor fans and passive window and domestic ventilation systems, and irrigation products such as sprinkler heads, compression fittings and micro-irrigation systems. Aliaxis’ multi-brand strategy supports a wide product range focused on added-value products and systems developed

• Other Products: a range of pumps and valves, ceramic products, electrical and extruded components for a

to meet customers’ specific needs.

wide range of applications, as well as some specialist The Group’s product range covers four main sectors:

distribution activities.

• Gravity (Non-Pressure) Systems: products whose

Increasingly, the Group is exploiting its worldwide presence

function is to evacuate or discharge waste water in

by expanding its product offering in every territory to include

construction applications, such as rainwater gutters and

products from other Group companies, and a number of

downpipes, soil and waste fittings, fittings for sewage

examples are given in the Review of Business Activities included in the Directors’ Report.

ALIAXIS WORLDWIDE

• 65 Production sites : 30

Western Europe

Eastern Europe

North America

South America

Asia and Australasia

Africa

• 86 Manufacturing and selling companies • over 460,000 Tonnes of resin processed per annum • c.11,600 Employees

p. 5

Corporate Governance Composition of the Board of Directors The members of the Board of Directors during 2004 were

The initial appointments to the Board of Directors were made

as follows:

on 18 June 2003, the date of formation of the Company, for a period of three years expiring in May 2006.

Jean-Louis Piérard Yves Noiret

Chairman & Chief Executive Officer Chief Operating Officer

Andréa Hatschek Philippe Leemans (up to 22 September 2004) Kieran Murphy Alain Siaens Bernard Steyaert Henri Thijssen Olivier van der Rest P h i l i p p e Vo o r t m a n ASB Invest SPRL (from 22 December 2004) Jean-Marie Emsens

Committees of the Board of Director s

Honorary Chairman

during 2004. There are four standing committees, each of which supports the Board in specific aspects of its role of

Although Aliaxis S.A. is a private company whose shares are

monitoring and supervising the activities and management

not listed on any regulated market, the Board is committed

of the Group:

to maintaining high standards of corporate governance

Strategy Committee: met five times during 2004,

throughout the Group. The Board of Directors met six times

attended by Jean-Louis Piérard (Chairman), Kieran

AUDITOR

REGISTERED OFFICE

• Klynveld Peat Marwick Goerdeler

• Aliaxis S.A.

Bedrijfsrevisoren – Reviseurs d’Entreprises

Avenue de Tervueren, 270

represented by Benoit Van Roost

B-1150 Brussels, Belgium

Avenue du Bourget, 40

No. Entreprise: 0860 005 067

B-1130 Brussels, Belgium

Tel : +32 2 775 50 50 - Fax : +32 2 775 50 51 Web-site : www.aliaxis.com E-mail address: aliaxis@aliaxis.com

p. 6

Aliaxis

Annual Report 2004

Murphy, Yves Noiret, Henri Thijssen and Olivier van der

reviewing terms of remuneration at senior management

Rest. The Strategy Committee is responsible for reviewing

level.

the strategic direction of the Group, business plans and

Selection Committee: consisted of Jean-Louis Piérard

major investment options and proposals.

(Chairman), Alain Siaens and Bernard Steyaert, and

Financial Audit Committee: met twice during 2004,

advises on Board-level appointments to the Company.

attended by Philippe Voortman (Chairman) and Philippe Leemans, plus an external member, Anthony Wilson, a former Chief Executive of Glynwed International PLC, a UK

Composition of the Executi ve Committee

listed company. The Financial Audit Committee supports the Board in monitoring accounting and financial reporting

Day-to-day management of the Company is delegated by

and in reviewing the scope and results of the Company’s

the Board to two Managing Directors, Jean-Louis Piérard,

external and internal audit procedures.

Chairman and Chief Executive Officer, and Yves Noiret,

Remuneration Committee: met four times in 2004,

Chief Operating Officer. The two Managing Directors are

attended by Alain Siaens (Chairman) and Bernard Steyaert.

assisted by an Executive Committee that consists of a

The Remuneration Committee supports the Board in

group of senior managers of the Company representing its

Members of the Executive Commitee (from left to right): Andrea Catanzano (Division Director), Yves Noiret (seated) (Chief Operating Officer), Tom Torokvei (Division Director), Alistair Vearonelly (Division Director), Yves Mertens (Finance Director), Hubert Dubout (Company Secretary), Jean-Louis Piérard (Chairman and Chief Executive Officer), Roger Smith (Business & Market Development Director).

To m To r o k v e i ( 1 9 4 3 - 2 0 0 5 ) It is with great sadness that we report the sudden death on 24 February 2005 of Tom Torokvei, Division Director and a Member of the Executive Committee of Aliaxis S.A. At the time of his death, Tom was Chairman of Aliaxis North America Inc, Ipex Inc and Canplas Industries Ltd, and was thus responsible for all the Group’s manufacturing activities in North America. His association with Aliaxis began with the acquisition of Glynwed Pipe Systems in 2001. Ipex Inc was a key part of that business, having itself been created through the merger of Tom’s own company, Scepter, with Canron prior to its acquisition by Glynwed in 1999. Tom Torokvei devoted his whole professional life to creating one of North America’s largest and most successful pipe systems companies. Ipex’s success today is a tribute not only to his vision and entrepreneurial skill in building the business over more than 38 years, but also to his managerial qualities and commitment to motivating colleagues to achieve excellence throughout the organisation. Always approachable, Tom commanded great respect within the industry, and colleagues in the Aliaxis Group came to value, and will miss, his knowledge, experience and wise counsel, as well as his generosity of spirit.

p. 7

p. 8

Aliaxis

Annual Report 2004

Directors’ Report on the Consolidated Accounts

• Introduction

• Economic Environment and Key Features

• Review of Business Acti vities

• Research and Development

• Environmental Review

• Human Resources

• Financial Review

• Outlook for 20 05 and Subsequent Events

HIGHLIGHTS • Sales of €1,680 million, a like-for-like increase on 2003 of 6.9% • Operating income of €199 million (11.8% of sales), a like-for-like increase of 11.8% • Strong residential housing market and level of demand for building materials in North America, which offset impact of raw material price increases • Trading in Europe more mixed, with German and UK markets difficult, and strong Euro holding back export growth • Further reduction in net financial debt to €659 million due to strong operating cash flow and with no significant proceeds from business disposals • Proposed dividend of €0.1467 gross per share (€0.11 net), an increase of 10% on 2003 and representing 13.3% of net current profit of €1.10 per share

p. 9

Dear Shareholders,

consolidation combined with raw material price increases putting pressure on margins. • Generally satisfactory progress in other major European

Introduction

markets despite low growth and increased competition in some sectors, as well as the strength of the Euro which

2004 is the second complete year since the demerger from

made export growth more difficult to achieve.

the former Etex Group in which the results of Aliaxis SA

• Favourable economic conditions in Australasia and South

as an independent entity are reported to you. Accordingly,

Africa which enabled the Group’s businesses to achieve

full comparisons with the previous year are included in the

good levels of growth.

Consolidated Accounts for 2004. Corporate activity in business acquisitions and disposals This report deals with the Consolidated Accounts of the

during the year was limited to the disposal in February 2004

Group. The Directors’ Report on the Non-Consolidated

of the springs business of Straub in Switzerland.

Accounts is available upon request from the registered office of the Company.

A number of reorganisation plans, aimed at improving the Group’s future profitability, were completed or implemented during the year, notably in the UK, Germany and North

Economic Environment and Key Features

America. The total cost of these plans reflected in the results of the Group amounted to €5.7 million (2003: €4.8 million).

Turnover in 2004 was €1,680 million (2003: €1,612 million). The overall increase in sales was 4.2%, but at constant

The operating activities of the Group generated significant

exchange rates and excluding the impact of changes in

cash flow thanks to the good level of trading activity during

the scope of the consolidation, the increase in sales was

the year, pro-active management of the cost base and of the

6.9%.

level of working capital, and effective prioritisation of new

Operating profit for the year was €199 million (2003: €179

capital investment. The amount contributed by business

million), representing 11.8% of sales (2003: 11.1%) after

and other asset disposals during 2004 was limited to only

charging €5.7 million (2003: €4.8 million) of reorganisation

€4 million (2003: €54 million).

costs. The overall increase in operating profit was 11.3%,

The strong operating cash flow was the major contributor

but at constant exchange rates and excluding the impact

to a further substantial reduction in net financial debt during

of changes in the scope of the consolidation, the increase

2004, from €720 million at the beginning of the year to

was 11.8%.

€659 million at 31 December, a reduction of €61 million,

The key features of trading during the year were:

or almost 8.5%.

• Favourable economic conditions in North America, with housing starts remaining at historically high levels and strong demand for all building materials offsetting the

Review of Business Acti vities

impact of raw material price increases. • A continuation of difficult economic conditions in Germany, where construction spending as a percentage of GDP

Europe

has now fallen by 50% during the last decade. With consumer confidence still weak, competitive pressure

The general economic and industry background to trading

was more intense in several sectors. Nevertheless,

in Europe during 2004 was mixed. Germany experienced

trading in Germany improved partly thanks to better export

another difficult year, with GDP growth of only about 1.8%.

performance, despite the strong Euro.

Unemployment reached a post-war high and, with low wage

• Difficult trading conditions in the UK despite the continued growth in construction activity, with increasing customer

p. 10

growth, consumer confidence remained at a low level.

Aliaxis

Annual Report 2004

Construction spending declined further during 2004, with

building and repairs, maintenance and improvement markets

the level of new residential building permits falling by about

remained weak, public works expenditure was stronger and

10%, offset by a modest increase in spending on repairs,

residential building output was better than expected, with

maintenance and improvements. The non-residential market,

around 260,000 housing starts. In Spain, 2004 proved a

however, remained weak, causing many firms to postpone

relatively positive year, with overall GDP growth of around

capital projects and there was little stimulus from public

2.7%. The construction sector continued its pattern of

sector spending. In France, the economy grew at a stronger

recent years and out-performed the overall economy, with

rate than in recent years, and the new residential building

residential output (which constitutes 50% of the sector)

market was boosted by tax incentives, low mortgage rates

rising by 4.4% and housing starts reaching a record high of

and a lack of supply of existing homes available for sale.

over 650,000.

As a result, new housing starts increased by over 15% to around 350,000 with the number of permits also increasing

Europe - Building Products

strongly. The repairs, maintenance and improvement market

Marley Deutschland mainly serves the German DIY market,

also improved modestly after two years of decline. The

which remained very price sensitive throughout 2004 as a

UK economy enjoyed GDP growth in excess of 3%, with

result of the continuing weakness in consumer confidence.

unemployment continuing to fall and the housing market

Competition was fierce, especially in the ventilation sector,

remaining stable throughout most of the year despite a

and more suppliers from Eastern Europe entered the German

gradual increase in interest rates. Output in the construction

market. In response, Marley Deutschland continued to

sector increased by an estimated 3.7%, with the private

invest in order to further enhance its quality and production

and especially the public new residential housing markets

efficiency, and secured new contracts with major customers

major contributors to this growth. Repairs, maintenance

in its core rainwater, sanitary and ventilation products. New

and improvement expenditure also remained reasonably

products introduced during the year included new ranges

strong mainly due to the strength of public sector activity.

of:

Non-residential construction markets recovered faster than

• Ventilation connectors, elbows and clamps.

expected, although infrastructure spending remained weak.

• Ventilation fans from sister company Greenwood Air

For the third year in succession, Italy’s economy featured low GDP growth, and although higher than in the two previous years, at about 1.1% it remained the lowest of any

Management. • Sanitary products supplied by sister companies Sanit and Abu-Plast.

major European economy. The construction sector provided

Sales of Wefa Plastic, which produces polypropylene hot

some counter-cyclicality, and whereas private non-residential

& cold water systems, again grew strongly despite the

The 150mm inspection chamber base offered in the UK by both Hunter and Marley Plumbing & Drainage, is manufactured by Marley using common tooling

The Waterloc system from Marley Plumbing & Drainage, to be launched in 2005, is a modular cell storm water management system designed to retain storm water for re-use or control its infiltration into the natural water system

p. 11

The Alfresco range from Greenwood (UK) offers the retail sector a unique concept in concealing a ventilation fan within the light fitting

weak domestic economy, thanks to exports to some 40 countries, accounting for the majority of its total sales. Wefa is pursuing a programme of range extension and during the year launched a new, more versatile, radiator connection system as well as a glass fibre reinforced pipe system. In the UK, trading was more difficult in 2004. This was partly the result of increasing customer consolidation, which together with the increase in raw material prices, put pressure on margins in our major plumbing products businesses. During the year, Marley Plumbing & Drainage consolidated

The acoustic performance of the new Phonoline

all its activities onto its main Lenham site; in addition,

push-fit soil & waste system from Redi (Italy) has

actual and potential synergies between Marley and other

soundproofing qualities that comply with European

UK Group companies Hunter and Greenwood continued

standards

to be exploited. For example, Marley invested in tooling

p. 12

for a new 150mm inspection chamber base to produce

The new mechanical saddle

products for both itself and Hunter. During 2005, Marley

fitting from Redi (Italy) can

will launch Waterloc, its new storm water management

be used in both solid and

system. A notable new product launched in 2004 was the

structured wall plastic as well

Deepflow Plus gutter system, incorporating redesigned

as concrete pipes

Aliaxis

fittings to make installation easier, including the innovative “Easyclip” jointing system. Aluminium rainwater products are a small but growing niche of the UK market, and Marley Alutec is now its largest supplier. As well as developing its range for the European market, Marley Alutec also assisted sister company Akatherm in developing the UK market for

Annual Report 2004

• A range of heat recovery units designed for use in apartment buildings. • The unique “Alfresco” designer ventilation range of combined fans and light fittings for the retail sector. • The Greenwood Airvac CVC range of central vacuum systems.

siphonic roof drainage. Hunter launched the 3.2 litre Endura grease interceptor,

In Italy competition was stronger due to the weakness in

manufactured by Canplas, into the UK market, and for the

non-residential and repairs, maintenance and improvement

fourth year in succession was awarded both the Wickes

spending. Our businesses in Italy continued to focus on

“Performance Orientation (Service)” award and the Buildbase

achieving greater efficiency. Redi invested in improvements

“Supplier of the Year” award.

in packaging and logistics and during 2004 launched

Greenwood Air Management serves the ventilation market,

“Phonoline”, a soundproof system of pipes and fittings for

and continued to benefit from the level of new housebuilding

the soil & waste market. Redi’s sewerage fittings in sizes

activity during 2004. Changes in UK building regulations

ranging from 160mm to 500mm diameter were used

have encouraged the use of higher value products such as

during the year for the drainage system of the new Italian

acoustic vents and heat recovery units, and Greenwood

high-speed railway connecting Turin and Venice. Redi also

successfully launched Nicoll’s range of acoustic vents which

completed its portfolio of polyethylene products by launching

were specified in a prestigious new development in north

electrofusion fittings manufactured by Innoge into the Italian

London. Other new products introduced by Greenwood

market. Both Redi and Redi HT achieved EN certification for

during the year included:

sewerage and the environment respectively.

Nicoll (France) offers its new Ovation range of gutters in a wide variety of colours to suit regional preferences and enhance the appearance of both contemporary and traditional architectural styles

The new class D400 heavy duty channel drainage system from Nicoll (France), used in applications from A new roofing ventilation tile offered by Nicoll (France) matches the surrounding roof area

the start of 2004, can withstand the force of heavy goods vehicles travelling at high speeds

p. 13

Europlast launched a new Rainwater Untrapper which has already shown good results, and also introduced ranges of

• A range of heavy duty drainage channels for commercial and industrial applications.

trim profiles from Marley Hungary and of surface drainage

• A 1-metre long, 130mm surface drainage channel.

made by Nicoll. At the end of the year, Nicoll Italy launched

• A number of new ventilation product ranges.

a new line of hot & cold water pipes and fittings, sales of

The pattern of demand for building products in Poland was

which will commence in 2005.

distorted by an increase in the rate of VAT that coincided

In France, Nicoll’s performance reflected only a modest

with Poland’s accession to the EU on 1 May. Strong demand

increase in domestic sales, but a strong export sales

in the first half of the year was offset by weaker demand in

performance both to other Group companies and to third

the second half, and raw material price increases together

parties. Rainwater sales were constrained by the increasingly

with the strong zloty put pressure on margins. Poliplast

difficult market, despite the good progress made by the

launched new channel drainage, soil & waste and sanitary

new Ovation system. The combined adverse impact of the

products, making its portfolio more attractive to builders’

pressure on selling prices and higher raw material costs

and sanitary merchants, specifiers and installers.

was partially offset by productivity gains and more effective

Pressure on public finances in Hungary had a negative

procurement. Export sales, notably of rainwater products

impact on the building industry and competition remained

and channel drainage, were particularly strong in Eastern

aggressive especially in profiles, channel drainage and

Europe.

sanitary products. Marley Magyarország intensified its

New products introduced by Nicoll during the year

efforts to improve its competitiveness and also launched a

included:

number of products made by sister companies, including

The new infra-red automatic WC flushing module launched by Sanit (Germany) is used with concealed cisterns in various commercial applications

The Friatherm uni® universal system for both drinking water and heating applications from Friatec (Germany)

Friatec’s new Friatherm multi pipeline system for sanitary and heating applications, to be launched in early 2005, combines the benefits of a flexible multi-layer pipe with both push-fit and press-fit technology for easy installation

p. 14

Aliaxis

Annual Report 2004

a siphon from SAS and the A15 channel drain from Nicoll.

efforts to diversify our customer base through increased

Similarly, products manufactured in Hungary were sold by

specification sales and exports, partially offset the negative

Aliaxis Group companies in Germany, Austria, the Czech

effect of weak new construction activity in some countries,

Republic and Italy.

in particular Germany, and produced an overall trading performance that was satisfactory.

Europe - Sanitary

Competition from low-cost countries remained a feature of

The Groupâ&#x20AC;&#x2122;s sanitary products activities in Europe are

activity in the sanitary sector, as elsewhere in the Group,

concentrated mainly in Germany, Spain, France, and to a

and particularly affected those products containing an

lesser extent, the UK. During 2004 the weakness in the

element of assembly. Counterfeit products originating in

domestic German market increased price competition, and

the developing economies continued to be in evidence, and

higher raw material and component prices were not always

during the year the Group became more pro-active in taking

able to be passed on to customers. These unfavourable

measures to protect its intellectual property assets.

trends, however, were in part compensated by more positive

In Germany, sales of both Sanit and Abu-Plast increased.

developments such as the more stable growth of repairs,

In the domestic market, sales activity through wholesale

maintenance and improvement activity and the continuing

merchants improved although sales in the DIY and OEM

impact of demographic trends such as the growth in new

sectors were weaker. The development of export markets,

household formations and changing consumer preferences,

particularly in Poland, the Czech Republic, Russia, the

which have led to an increased number of sanitary

Netherlands and the Middle East was encouraging, and it

installations such as toilets, shower rooms and bathrooms

was also notable that good progress was made with more

in residential dwellings. Those trends, added to our own

recently launched products.

The Alona shower head, part of a new range offered by Jimten (Spain)

SAS (France) is a leader in the manufacture of sink drainage fittings, including this new highquality fitting equipped with a patented pull control system

p. 15

The markets for Friatec’s sanitary product ranges became

of a macerator that allows the installation of toilets and

increasingly competitive, and the business devoted more

bathrooms in those parts of buildings remote from the

effort to product development. A number of measures were

normal waste discharge system, or where waste water

taken to rationalise and automate the German operations

must be pumped to the sewerage network. Similarly in

to improve their overall efficiency, and both Friatec Building

France, SAS continued its growth trend of the recent past,

Services and Abu-Plast became ISO 14001 compliant during

thanks in part to the strength of the French housing market

the year.

in 2004 and its success in gaining new business from a more

major distributor. A new dual flushing mechanism designed

technological products with higher added value, for example

to economise on water usage was developed during the

New

product

development

was

focused

the infrared and remote control flushing system developed

year by SAS, and its range of automatic sink wastes, offering

by Sanit, mainly for commercial and healthcare applications.

an extended choice in terms of both design and materials,

Early in 2005, Friatec Building Services launched its new

was well accepted by the market.

Friatherm multi pipeline system for sanitary and heating

The Group’s sanitary products activities in the UK increased

applications, based on easy to install push-fit and press-fit

significantly in 2004, and Multikwik was able to improve its

technology.

route to market through a reorganisation of its distribution

Jimten and Riuvert in Spain continued to make good

arrangements. Multikwik’s new products in 2004 included:

progress, despite increased competition in many product

•A

new

external

cistern

manufactured

Paling,

sectors, through improvements to their product mix and

incorporating a Multiflush valve produced in France by

increased efforts to penetrate higher margin specifier

SAS.

markets. During the year, Jimten launched a number of

• The “Easy Boss” fitting, supplied by Riuvert in Spain, used

new hand shower models, and completed the development

to connect 110mm soil pipes to 32mm and 40mm push-fit

The new Quickair compressed air system from Girpi (France), launched in June 2004, incorporates a mechanical coupling for industrial equipment applications, and was developed in co-operation with FIP (Italy) and Aliaxis R&D

One of a range of actuated valves offered by FIP (Italy)

p. 16

Aliaxis

or solvent weld pipes. • An extended range of concealed frame cisterns, supplied from Germany by Sanit.

Annual Report 2004

fittings also increased especially in export markets such as France and South Africa, and the new range of FLOWX3 flow meters helped to boost sales of actuated valves

During the year, all companies in the sanitary division tried

and flow meters. Girpi (France) launched its new Quickair

to develop sales through the Group’s Master Distribution

system, incorporating mechanical fittings and designed for

division into territories where the Group’s sanitary offering

compressed air applications, during the year, and Durapipe

has, in the past, been under – represented.

(UK) benefited from its restructuring programme and increased focus on key markets.

Its Petrol-Line system

Europe - Industrial

continued to grow, and during the year new markets were

The Group’s European industrial products are designed to

developed in the Far East and the product was used in a

meet international standards and are marketed worldwide.

large UK contract.

The continuing strength of the Euro during 2004, therefore,

Friatec Rheinhütte and Th. Jansen + Rheinhütte Valves won

was an adverse factor especially in those regions influenced

a number of major international contracts in their chosen

by the US dollar. Nevertheless, and despite generally weaker

sectors, and the Frialit-Degussit ceramics business also

industrial markets, positive trends in a number of strategic

had a successful year. However, the Fridurit laboratory

industries (e.g. steel, electronics, pharmaceutical and food &

equipment

beverage), combined with the success of a number of new

conditions as a result of its dependency on German public

products, enabled an improvement in overall performance

sector investment which remained very weak.

over 2003.

A number of new product development initiatives were

At FIP (Italy), sales advanced particularly well due to the

pursued during the year, the common drivers being safety

growth of new-generation PVC valves. Sales of compression

(e.g. double containment pipework, and improvements

business

suffered

from

difficult

market

The complete range of industrial pipe systems from Durapipe (UK) was installed in this film processing plant in Spain

Installation of a gas pipeline in the UK, using D630 Frialen couplers

p. 17

Friagrip+ flange adapters and couplers from Friatec were specified to connect reconditioned sections of the municipal water pipeline in Guttersloh (Germany)

to Durapipe’s and Akatherm’s chemical drainage product

The polyethylene fittings business competes in an

ranges), and convenience of use for installers (e.g. Girpi’s

international marketplace, and despite low growth in many

Quickair system for compressed air applications, and FIP’s

major markets and the strong Euro, performance improved

easy-to-use actuated valves). These developments are

in 2004, reflecting the increasing acceptance by water

part of a continuous effort to make the product range as

and gas companies throughout the world of polyethylene

comprehensive as possible.

electrofusion fittings as their material of choice. During the year, Friatec, GPS and Innoge all focused on reducing their

Europe - Utilities

cost base by rationalising production sites, reducing costs

Aliaxis’ European utilities businesses, serving the gas and

and achieving critical mass in order to remain competitive in

water supply sectors, broadly maintained their performance

the worldwide electrofusion market. Friatec concentrated

despite low demand in Germany and the UK as a result of

on maintaining its present leadership position through

weak infrastructure spending. Over-capacity in the European

continuous product innovation and in 2004 launched new

market and the impact of polymer cost increases also

fittings in response to customers’ needs, identified as a

put pressure on margins, and in the UK there was added

result of the close contacts maintained with all its major

uncertainty caused by proposed structural changes in the

end-users.

gas distribution market, and in the water industry by the

New products introduced in 2004 included:

five-yearly spending review by the UK regulator. Despite the

• “Protecta-Line”, a barrier pipe used in applications in

uncertainty, our GPS polyethylene pipe systems business made good progress and signed new contracts with two major water companies.

p. 18

contaminated land. • “Secura-Line”, a multi-layer polyethylene/polypropylene skinned pipe for the water and gas markets.

Aliaxis

Annual Report 2004

Europe - Other Activities

number of initiatives that came to fruition during the year.

The Group’s Master Distribution activities, which promote

Consolidation of its warehousing and distribution activities

and distribute a wide range of Aliaxis products in countries

allowed the business to improve its logistics and inventory

where the Group might otherwise have a limited presence,

management, and the introduction of new working patterns

achieved good growth in sales mainly thanks to a strong

increased plant capacity and lowered unit costs. Sales of

first half and continued development of the product range

products launched in 2003, such as the WeatherPro Roof

as more Group products were distributed through this

Vent, Europlast’s surface drainage products and an extended

channel. A three-year project to enhance customer service

range of ABS fittings for the US market, were further

by improving logistics throughout Europe was started during

developed during 2004, and a number of new products

2004.

were introduced: • A new Ridge Vent.

North America

• New 35 and 50 gallons/minute capacity Grease Interceptors. • A range of gasketed sewer fittings from sister company

In North America, the US economy enjoyed strong GDP

Ipex sold in conjunction with Canplas’ own solvent weld

growth estimated at 4.4%, with the Canadian economy

fittings.

growing at about 2.7%. Construction output in both

• A range of shutters launched at the end of the year.

countries was stronger than most forecasts for 2004

Ipex traded well in both the Canadian and US markets thanks

had anticipated, thanks to the residential housing sector

to the favourable economic conditions. Product approval for

(which accounts for some 45% - 50% of total construction

low-density PVC pipe was obtained in a number of local

spending) remaining robust throughout the year, with high

markets, additional capacity for electrical non-metallic tubing

levels of housing starts and building permits in both Canada

was commissioned at the St Laurent plant during the year,

and the USA, as well as increases in sales of existing

and a number of other process and product improvements

homes. By contrast, non-residential construction activity

were implemented. A total of 13 new products were

and infrastructure investment was subdued. The strength of the housing market reflected a continuation of relatively favourable economic conditions, with low interest rates, low unemployment and a high level of consumer confidence all

Ipex’s market leading range of Kwikon couplings and

contributing to strong demand for all building products. The

connectors allow easy installation without the use of

consequent upward pressure on selling prices, exacerbated

solvent cement or tape

by a strong worldwide demand for commodities, allowed raw material price increases to be passed on to consumers and thus reduced their adverse impact on profit margins. The significant commodity-based component of the Canadian economy and the ongoing budget surplus combined to increase the value of the Canadian dollar against the US dollar. Both Ipex and Canplas were adversely affected by the impact of exchange rate movements on selling prices in the US as well as by increased competition in their domestic Canadian markets from lower-cost US products. Industry consolidation was again a feature during the year both at the manufacturer level and amongst the distributor customer base, and the trend towards outsourcing of production to low-cost economies continued. Apart from the favourable economic environment, Canplas’ performance during 2004 reflected the benefits of a

p. 19

launched during 2004, of which notable examples were:

local economy during 2004, and continued low interest

• In the municipal pressure and gravity systems market,

rates and a 30-year low in the level of unemployment

Q-Line, an engineered composite pipe of aluminium/HT

helped to support consumer demand, with the strong NZ

polyethylene, designed to ensure the quality of drinking

dollar mitigating some of the inflationary pressure of higher

water in aggressive water and soil conditions.

commodity prices in the case of imported raw materials.

• In the same sector, the Vortex thermoplastic self-cleansing

Sales volumes and revenues in Marley New Zealand

sewer insert which eliminates noxious emissions and

both increased, especially in rainwater products and

corrosion in vertical sewer shafts.

fittings. A new commercial rainwater system from Nicoll

• In the electrical systems market the expansion of Ipex’s

was launched during the year and Marley maintained its

industry-leading Kwikon range of couplings and connectors

market position despite the continued vertical integration

that allow quick and easy installation without the use of

of some competitors. The new 630mm polyethylene line

solvent cement or tape.

began production in late 2004 and good progress was

• A new locking joint PVC pipe specifically designed for

made with J-Pipe, a co-extruded skinned polyethylene pipe

trenchless applications, TerraBrute. This was announced

which is sold into the non-pressure civil and infrastructure

at the end of 2003, and was first used in commercial

markets. A joint industry initiative is currently under way

applications during 2004.

to introduce a product certification scheme similar to

• In the radiant heating market, the new KTile, which

Australia’s “Watermark”. Significant efficiency gains were

provides a secure fixing system for Ipex’s WarmRite Floor

achieved in manufacturing, and the Manurewa site achieved

underfloor heating.

ISO 14001 compliance during the year. Aliaxis-sourced products continued to improve the value of Marley’s market offer, especially in electrofusion, acoustic and polyethylene

Rest of the World

drain, waste and ventilation systems and surface drainage Our businesses in New Zealand benefited from the strong

products.

The new Vortex thermoplastic sewer insert from Ipex (Canada), helps eliminate noxious emissions and corrosion in vertical sewer shafts

The white internal wall section of Marley New Zealand’s new Jpipe is non-light scattering, facilitating post-installation inspection using CCTV cameras. The product was specified, along with Friamat electrofusion couplers, to carry high voltage cables supplying power to Auckland’s central business district

p. 20

Aliaxis

Annual Report 2004

Universal Transition Fittings from Philmac (Australia) enable plastic and metal pipes to be joined together

on the construction cycle was broad-based, to the extent Dynex enjoyed a good year as a result of a significant growth

that shortages both of building materials and skilled labour

in sales of its “Palliside” weatherboard cladding system.

became apparent during the year. The level of building

Economic conditions in Australia also remained favourable

activity was especially strong in the residential sector,

and the mining sector was driven by strong demand for

where new permits for residential dwellings increased by

commodities. However, the rural and irrigation sectors

more than 25%. The non-residential sector also showed

were subdued due to continuing drought conditions, and

substantial improvement, and the prioritisation of water and

water restrictions limited the domestic, commercial and

sewerage infrastructure development by the Government

municipal use of water and consequently held back demand

stimulated strong growth in our own civils products. For

for irrigation products. Nevertheless, Philmac was able to

example, Marley South Africa fulfilled a contract during the

increase its market activity and to obtain growth from new

year to supply the civils infrastructure for the 65,000 unit

product categories during the year. Market conditions in the

Soweto Housing Project.

plumbing and hardware and industrial sectors were better

New products introduced during the year included the

and Philmac grew its sales into these sectors, driven by

manufacture and export of several products on behalf of

compression fittings and the introduction of a low-pressure,

sister companies: for example, polyethylene/steel transition

high density polyethylene drainage system supplied by

fittings and polyethylene reducing saddles (for Friatec) and

Akatherm. Despite the strength of the Australian dollar,

250mm ball valves for Innoge. New products launched into

Philmac also increased its exports significantly, especially

the local market included:

through Group companies in the UK, South Africa and New

• Expanded ranges of PVC sewer and pressure pipes, in

Zealand.

various diameters.

The South African economy picked up significantly in 2004

• A new, improved Streamline gutter system which has

after a modest 2003, with GDP growth of about 3.4%.

helped Marley to recover its market position during the

The economic environment was encouraging, and fiscal

year.

stability, low inflation and low interest rates all helped to

• A range of Akatherm polyethylene drainage systems.

stimulate both private and public investment and sustain

Akatherm products were also used in the construction of

the longest upswing for many years. The positive impact

200 units at the Vacation Club at Sun City.

p. 21

R e s e a r ch a n d D e v e l o p m e n t Aliaxis has always regarded Research and Development both as a key asset and a critical resource in maintaining the Group’s activities and in supporting its organic growth. A corporate research centre, today called Aliaxis R&D, was established many years ago. Located in France, Aliaxis R&D carries out applied research and uses its sophisticated technical resources to provide day-to-day technical support

in place effective environmental management systems to

to Aliaxis businesses throughout the world.

achieve lasting improvements in environmental performance, and, as a minimum, to conform to the requirements of any

In keeping with the Group’s philosophy of encouraging

national or local regulations.

development and innovation to serve local market needs, major Group companies such as Ipex, Nicoll, Friatec,

Aliaxis also encourages its manufacturing operations to

Glynwed, Jimten, Sanit, Philmac and FIP have also

achieve recognition of the quality of their management

established local R&D capabilities which are expert in

systems, in particular through certification. Thus, at the

their own individual products. These local facilities work

end of 2004 seventeen sites (compared with ten sites

closely with Aliaxis R&D, particularly in the fields of

at the end of the previous year) had achieved ISO 14001

material development and testing as well as in new product

certification. The Group’s objective for 2005 is to achieve

development. During 2004 a new multi-purpose acoustic

certification at more than 30% of all its production sites.

laboratory was built at Aliaxis R&D in order to further the

In North America, Ipex and Canplas are committed to the

Group’s expertise and help it fulfill the market’s increasing

Environmental Management Program of the Vinyl Council of

requirements for acoustic products.

Canada in respect of their manufacturing operations.

As a result of its policy of continuous investment, Aliaxis today owns state-of-the-art R&D facilities which are

In relation to existing products as well as new products

organised throughout the world in a network of excellence

in the R&D pipeline, Aliaxis follows a “cradle to grave”

centres.

lifecycle approach from the initial concept of the product through to post-consumer recycling. In that context, and in

Both Aliaxis R&D and local R&D establishments have

order to meet the challenge of sustainable development,

developed long-standing relationships with a number of key

the Group participates in a European industry sponsored

universities or engineering schools, from which the Group

10-year programme initiated in 2000 and known as “Vinyl

recruits students both for industrial training and permanent

2010 - The Voluntary Commitment of the PVC Industry”. This

positions.

programme addresses all stages of the PVC lifecycle and is aimed at continuous improvement, from manufacture to

Aliaxis voluntarily pursues a policy of active patent protection,

end-of-life waste management.

supported where necessary by legal action, as a means of protecting its technology and new product developments

The environmental profile of our main manufactured

against the increasing threat from counterfeit products.

products has been enhanced by the use of recycled resins and the recovery of external end-of-life waste material.

Environmental Review

Also, more than 98% of internally generated scrap material is reprocessed into finished products. Further to

p. 22

In environmental matters Aliaxis’ policy is one of continuous

its active participation in Vinyl 2010 as discussed above,

improvement.

Aliaxis supports the voluntary commitments made by The

The Group requires each of its production sites to have

European Plastic Pipes and Fittings Association (“TEPPFA”)

Aliaxis

Annual Report 2004

in relation to the recycling of material through take-back and

meeting since its creation in June 2004, attended by a total

other similar schemes. Thus, the Group actively encourages

of 15 representatives from various countries within the

its businesses to initiate or support any project aimed at

European Economic Area where the Group has operating

developing the recycling of PVC pipes and fittings at the

activities. The meeting was held in Brussels over two days

end of their natural life cycle. This is particularly true in

and covered a number of subjects relating to the activity of

several European countries, for example in France, where

Aliaxis within the European Economic Area, including the

the participation of Girpi and Nicoll has been decisive in the

Group’s performance, development and benchmarking. It

creation of “PVC Recyclage S.A.” to further this objective.

was also an occasion to develop a dialogue between the Group and its employee representatives. One outcome

Human Resources

of the meeting was that a two-day training course on the subject of financial information and analysis was held in

At the end of 2004, the Group employed approximately

November. A further meeting of the European Workers’

11,600 people including 7,300 in Europe, 2,600 in North

Council will take place in June 2005.

America, 600 in Australasia and 1,100 in the rest of the world.

As part of its ongoing commitment to keep employees around the world informed of current developments, the

The Group’s approach to human resources management

Group published four editions of its in-house magazine

reflects its belief that day-to-day human resources activities

“Image” during the course of the year. A number of Aliaxis

are best managed at a local operational level. At the

companies supplemented “Image” by also publishing their

same time, in order to maximize the benefits of a group

own internal magazines locally.

organisation, the Group’s policy, as in other areas of the business, is to facilitate the sharing of best practice and

Health and safety is also a key area of focus, and the Group

therefore it does lay down key procedures and guidelines to

recognises that each of its operating units around the

be followed by all companies in the Group.

world must ensure the health, safety and welfare of all its

One key area of focus in Human Resources is succession

employees as well as other people who might be affected by

planning and employee development. Recruitment and

its activities. Thus, the Group continuously aims to promote

succession planning needs over the short, medium and long

standards of health, safety and welfare that comply with

term were reviewed in detail and in consequence a number

the terms and requirements of local, regional and national

of initiatives were introduced in order to ensure that the

regulations of all those countries where it operates.

Group is best able to meet its requirements for the future. The Group held the first European Workers’ Council

Financial Review Introduction

At 31 December 2004, Aliaxis had completed two full years of trading as an independent entity. Therefore both the Consolidated and Non-Consolidated Accounts include comparative data for 2003, and the Key Figures table shown on page b includes key information for both years of trading. The accounting principles set out in pages 34 to 39 of this Q-Line, introduced by Ipex in 2004, is an engineered

Annual Report are in line with Belgian GAAP. As previously

composite pipe of aluminium/polyethylene construction,

reported, the Board has decided to adopt International Financial

suitable for both hot and cold water pressure applications.

Reporting Standards - International Accounting Standards

Q-Line is designed to resist corrosion and provide a

(IFRS-IAS) beginning with the Annual Report for 2006.

permanent barrier against ground contamination

p. 23

The Group has already begun the conversion process using

Zealand dollar by 3.6% and the Australian dollar by 2.8%.

internal project teams supported by external advisers, and

Gross margin reached €542 million (2003: €516 million),

is addressing the implications of IFRS-IAS on key elements

representing 32.3% (2003: 32.0%) of sales, and commercial,

of the accounts as well as the appropriate systems and

administrative and other charges amounted to €343 million

training requirements.

(2003: €338 million), representing 20.4% (2003: 20.9%) of sales.

Changes in the Scope of Consolidation

Operating profit for the year was €199 million (2003: €179 million), representing 11.8% (2003: 11.1%) of sales, after

The main changes in the scope of the consolidation during

charging €5.7 million (2003: €4.8 million) of reorganisation

2004 were:

costs. The overall increase in operating profit was 11.3%,

• Consolidation of the Group’s 100% shareholding in Wefa

but at constant exchange rates and excluding the impact

Plastic (Germany);

of changes in the scope of the consolidation, the increase

• Sale to a third party of the assets of the springs business of Straub (Switzerland).

was 11.8%. Operating profit was reduced by changes in the scope of the consolidation (0.2%) and by adverse exchange rate movements (0.3%). Operating cash flow reached

Profit and Loss Account

€267 million (2003: €247 million), representing 15.9% (2003:15.3%) of sales.

Turnover in 2004 was €1,680 million (2003: €1,612 million),

The financial result for the year was a net charge of €44

including the turnover of the business sold during the year up

million (2003: €59 million), consisting of net interest charges

to the date of sale. The overall increase in sales was 4.2%,

of €48 million (2003: €53 million) and other financial income,

but at constant exchange rates and excluding the impact of

mainly realised and unrealised exchange gains and losses

changes in the scope of the consolidation, the increase in

arising on assets and liabilities held in local currencies, of

sales was 6.9%. Changes in the scope of the consolidation

€4 million (2003: charge of €6 million). The Group operates

reduced turnover by 1.3% due to the absence of any sales

a policy of managing its interest rate exposure, and the major

contribution from businesses sold in 2003, offset by the

part of its debt was covered throughout 2004 by the use of

consolidation from 1 January 2004 of German subsidiary

fixed interest rate swaps, with appropriate caps, floors and

Wefa Plastics. Adverse exchange rate movements further

similar derivative instruments. The proportion of the debt

reduced turnover by 1.4% in total, with the Canadian dollar

thus covered reduces in line with the debt maturity dates.

weaker by 2.2% and the US dollar weaker by 10.0%,

The balance of the debt remained at variable interest rates.

compensated by sterling strengthening by 1.9%, the New

Amortisation of goodwill on consolidation was €36 million

Summary of consolidated results € million Turnover Operating Income Financial Result Goodwill Amortisation Extraordinary Result Income Taxes Profit of Consolidated Companies Share in Results of Associated Companies Share of Minority Interests Net Profit (Group Share) Net Current Profit (Group Share) Net Current Cash Flow (Group Share)

p. 24

2004 1,680 199 (44) (36) (5) (52) 62 1 (2) 61 100 167

2003 1,612 179 (59) (37) (2) (37) 44 1 (2) 43 80 148

Aliaxis

(2003: €37 million), the goodwill relating mainly to the

Annual Report 2004

Balance Sheet

plastics activities acquired through the purchases of Etex France (1994), Marley (1999) and Glynwed Pipe Systems

Intangible assets at 31 December 2004 were €12 million,

(2001).

unchanged from the previous year.

The extraordinary result was a charge of €4.7 million (2003:

Goodwill amounted to €484 million at the end of 2004,

charge of €1.9 million) and consisted mainly of a €2.3

a reduction of €40 million from the €524 million reported

million write down of certain tangible fixed assets to their

at 31 December 2003. The movement reflected the

estimated economic value, and a loss of €1.4 million on the

amortisation charge of €36 million, together with currency

business disposal made during the year. The net impact on

translation differences of €4 million arising from goodwill

the results of the business disposed of during the year was

held in local currencies.

negligible.

Tangible assets amounted to €506 million compared with

The Group’s share of the results of associated companies,

€505 million at the beginning of the period. The increase

corresponding to the 40% shareholding in Duratec-Vinilit in

of €1 million was due to the impact of new investment of

Chile, was €1.1 million (2003: €0.5 million).

€72 million and changes in the scope of the consolidation

Current and deferred taxes amounted to €52 million (2003:

(€1 million), offset by depreciation during the period of

€37 million), representing an effective income tax rate of

€66 million, assets sold during the course of the year (€4

34% (2003: 31%).

million) and the impact of exchange and other movements

After deducting third-party minority interests, consisting

(€2 million).

mainly of Paling (Malaysia), Universal (China), Vigotec

Financial assets at the end of the period consisted mainly of:

(Belgium) and Arnomij (Netherlands), of €1.9 million (2003:

(i) a 40% shareholding in an associated company, Duratec-

€1.6 million), the Group’s share of net profit in 2004 was

Vinilit (Chile).

€61 million (2003: €43 million).

(ii) several other shareholdings in non-consolidated trading

The Group’s share of net current profit was €100 million

companies such as Ipex in Mexico and Nicoll in Argentina

(2003: €80 million), representing €1.10 per share (2003:

and Peru.

€0.89 per share) and the Group’s share of net current cash

The reduction during the year from €45 million to €28 million

flow was €167 million (2003: €148 million), representing

principally reflected the sale for €15.3 million of the Group’s

€1.84 per share (2003: €1.63 per share).

2.8% shareholding in Etex Group in exchange for part of Etex Group’s shareholding in Aliaxis SA, as well as the consolidation from 1 January 2004 of Wefa Plastics (Germany), which in 2003 was included as a financial asset.

Summary of consolidated balance sheet € million Intangible Assets Goodwill Tangible Assets Financial Assets Total Fixed Assets Treasury Shares Non-Cash Working Capital Total Capital & Reserves Minority Interests Total Equity Provisions for Liabilities and Charges, and Deferred Taxation Net Financial Debt Total

31 Dec 2004 12 484 506 28 1,030 19 325 1,374 574 10 584 131 659 1,374

31 Dec 2003 12 524 505 45 1,086 1 313 1,400 536 10 546 134 720 1,400

p. 25

The exchange of shares with Etex Group increased the

The return on capital employed in 2004 reached 14.1%

Group’s holding of Treasury shares, which are shown

(2003: 13.5%) and the Group share of current return on

separately in the balance sheet, valued at an average cost

equity was 16.2% (2003: 16.8%).

per share of €3.60. Working capital increased from €313 million at the beginning

Outlook for 2005 and Subsequent Events

of 2004 to €325 million at 31 December 2004, an increase of 3.8%. At that level, the working capital requirement

Outlook for 2005

represented 19.3% (2003:19.4%) of sales, which was the

After a good year in 2004, which nevertheless showed signs

lowest point of the year, and reflected the seasonal nature

of slowing down in the second half, we remain cautious

of the Group’s activities.

about trading conditions in 2005, which should, however,

The capital and reserves of the Group increased from €536

stay at a reasonable level. The early part of the year suggests

million to €574 million as a result of the Group’s share of net

that there has been some cooling of the housing markets

profit for the year (€61 million), less the proposed dividend

in Europe and Australasia, and Germany still shows no sign

(€13 million) and the negative impact of exchange rate

of a sustained recovery. The continued strength of the Euro

movements (€10 million).

is also unhelpful in trying to sustain our European export

Minority interests at 31 December 2004 remained

performance.

unchanged at €10 million, reflecting net profits for the year

Although activity in the North American residential housing

(€2 million), less dividends paid in 2004 and the negative

market has remained good in the first quarter of the year,

impact of exchange rate movements.

the US trade deficit and continued weakness of the dollar

Provisions and deferred taxation at the beginning and end of

remain a concern since any government action to tighten US

2004 were as follows:

monetary and fiscal policy may lead to a slowing of growth that would have a wider negative impact on the global

€ million Post-employment Other Deferred taxation Total

31 Dec 2004 85 16 30 131

31 Dec 2003 81 19 34 134

economy. Raw material prices continue to be high, and the outlook for the remainder of 2005 remains uncertain. The major priorities for Aliaxis in 2005 once again will be to pursue initiatives to manage the Group’s cash generation and improve performance throughout the organisation by

The post-employment provision excludes €7.5 million (2003:

pursuing a range of projects already identified. Aliaxis will

€1.4 million) of unrecognised actuarial losses.

also pursue selected development opportunities where

The Group has a five-year syndicated loan facility, expiring

clear advantages to the Group can be demonstrated.

in 2008, secured by upstream guarantees from a number of holding and operating companies. This facility consists

Subsequent Events

of a tranche of €535 million at 31 december 2004 which

The Board of Directors of Aliaxis has no knowledge of any

amortises progressively over the remaining loan period,

events that might have occurred between the year end

and a further tranche in the form of a committed revolving

and the date of approval of these accounts that would

credit of €350 million. In addition the Group has a number

significantly affect these accounts.

of committed and uncommitted bilateral lines of credit. Net financial debt reduced by €61 million during 2004, from €720 million to €659 million, thanks largely to the Group’s cash flow generation. The Group maintained a significant part of its debt in foreign currency instruments (principally, and in

Brussels, 12 April 2005

order of importance, in Canadian dollars and sterling) so as

The Board of Directors

to partially hedge its assets held in different countries.

p. 26

Aliaxis

Annual Report 2004

Financial Data

Table of Contents

Consolidated Accounts

Auditorâ&#x20AC;&#x2122;s Report

Non-Consolidated Accounts and Profit Distribution

Aliaxis Companies Worldwide

Glossary of Key Terms and Ratios

p. 27

Consolidated Accounts C O NSOLIDATE D B ALANC E S HEET

ASSETS (â&#x201A;Ź â&#x20AC;&#x2DC; 000s) FIXED ASSETS II. Intangible assets III. Goodwill IV. Tangible assets A. Land and buildings B. Plant, machinery and equipment C. Furniture and vehicles D. Leasing and other similar rights E. Other tangible assets F. Under construction and advance payments V. Financial assets B. Associated companies 1. Share of net assets C. Other financial assets 1. Shares 2. Amounts receivable CURRENT ASSETS VI. Amounts receivable after one year A. Trade receivables B. Other amounts receivable VII. Inventory and contracts in progress A. Inventory 1. Raw materials and consumables 2. Work in progress 3. Finished goods 4. Goods purchased for resale 6. Advance payments B. Contracts in progress VIII. Amounts receivable within one year A. Trade receivables B. Other amounts receivable IX. Investments A. Treasury shares B. Other investments and deposits X. Cash at bank and in hand XI. Deferred charges and accrued income

TOTAL ASSETS

p. 28

At 31 December 2004 1,030,330 12,239 483,650 506,357 257,952 201,127 16,971 2,446 3,799 24,062 28,084 11,849 11,849 16,235 10,755 5,480 696,457 16,786

At 31 December 2003 1,086,051 11,879 524,132 505,112 260,533 205,757 16,790 367 3,036 18,629 44,928 11,136 11,136 33,792 26,151 7,641 696,533 16,363

10 16,776 312,198

5 16,358 285,411

312,006 61,965 24,054 190,869 35,099 19 192 278,552

285,261 54,408 24,402 173,925 32,302 224 150 283,345

251,339 27,213 24,221

250,196 33,149 10,221

18,815 5,406

1,270 8,951

53,716 10,984

80,601 20,592

1,726,787

1,782,584

Aliaxis

Annual Report 2004

C O NSOLIDATE D B ALANC E S HEET

EQUITY AND LIABILITIES (€ ‘ 000s) CAPITAL AND RESERVES I. Capital A. Issued share capital II. Share premium account IV. Reserves VI. Translation differences VII. Capital subsidies MINORITY INTERESTS VIII. Minority interests PROVISIONS FOR LIABILITIES AND CHARGES AND DEFERRED TAXATION IX. A. Provision for liabilities and charges 1. Pensions and similar obligations 2. Taxation 3. Major repairs and maintenance 4. Other risks and charges B. Deferred taxation CREDITORS X. Amounts payable after one year A. Financial debts 2. Unsubordinated debentures 3. Leasing and other similar obligations 4. Credit institutions 5. Other financial loans D. Other amounts payable XI. Amounts payable within one year A. Current portion of amounts payable after one year B. Financial debts 1. Credit institutions 2. Other financial loans C. Trade payables 1. Suppliers 2. Bills of exchange D. Advances received on contracts in progress E. Taxes, remuneration and social security 1. Taxes 2. Remuneration and social security F. Other amounts payable XII. Accrued charges and deferred income

TOTAL EQUITY AND LIABILITIES

At 31 December 2004 At 31 December 2003 573,814 535,714 62,444 62,387 62,444 62,387 10,972 10,365 564,961 516,678 (65,970) (54,874) 1,407 1,158 10,302

9,717 10,302

131,161

9,717

134,303 101,167 84,860 3,295 78 12,934 29,994

1,011,510 596,043

100,468 80,902 4,648 149 14,769 33,835 1,102,850 678,729

595,939 20,000 2,126 572,542 1,271 104 399,455

678,632 0 563 675,675 2,394 97 408,745

56,551 65,315 64,405 910 148,180

66,307 64,854 61,854 3,000 151,376

144,946 3,234 1,050 100,338 34,470 65,868 28,021

147,878 3,498 657 89,930 29,004 60,926 35,621

16,012

15,376

1,726,787

1,782,584

p. 29

C O NSOLIDATE D PROF IT AND LOS S AC C O U N T

YEAR ENDED 31 DECEMBER (â&#x201A;Ź â&#x20AC;&#x2DC; 000s) I. Turnover II. Cost of sales III. Margin IV. Commercial charges V. Administrative charges VI. Research and development expenditure VII. Other operating income VIII. Other operating charges

2004 1,679,765 (1,137,973) 541,792 (183,511) (134,017) (16,325) 16,112 (25,244)

2003 1,611,610 (1,095,333) 516,277 (186,397) (136,129) (16,014) 19,460 (18,583)

198,807

178,614

Financial result X. Financial income A. Income from financial assets B. Income from current assets C. Other financial income XI. Financial charges A. Interest and other debt charges C. Other financial charges

(44,183) 20,969

(58,993) 19,538

Goodwill amortisation

(35,800)

(36,797)

118,824

82,824

(4,720) 816

(1,892) 3,178

IX. Operating income

XII. Profit on ordinary activities, before income taxes Extraordinary result XIII. Extraordinary income D. Write-back of provisions for extraordinary liabilities and charges E. Gain on disposal of fixed assets F. Other extraordinary income XIV. Extraordinary charges A. Extraordinary depreciation of, and extraordinary amounts written off, intangible and tangible assets B. Amounts written off financial assets C. Provisions for extraordinary liabilities and charges D. Loss on disposal of fixed assets E. Other extraordinary charges XV. Profit for the year of the consolidated companies before taxation XVII. Income taxes A. Current income taxes B. Deferred income taxes C. Adjustment to income taxes and write-back of tax provisions XVIII. Profit of the consolidated companies

p. 30

803 2,182 17,984 (65,152)

1,174 3,046 15,318 (78,531)

(50,526) (14,626)

(56,432) (22,099)

408

497 250

2,452 318

(5,536)

(5,070) (1,481) (310) (1,140) (793) (1,812)

(99) 0 0 (1,410) (3,561)

114,104

80,932

(52,472)

(37,434) (57,579) 3,882 1,225

(36,224) (3,057) 1,847

61,632

43,498

1,123

549

XIX. Share in the result of associated companies A. Profits XX. Consolidated profit XXI. Share of minority interests

62,755 (1,912)

44,047 (1,571)

XXII. Share of the Group

60,843

42,476

1,123

549

Aliaxis

Annual Report 2004

A P P EN D IX I: FUL LY C ONS OL IDATED C O MPAN I E S

Only the major companies included in the scope of the consolidation at 31 December 2004 are listed in Appendices I and II. Companies of minor importance are not included. A complete list of the companies included in the scope of the consolidation is deposited at the National Bank and can be obtained on request from the Company.

Company

% Participation

City

Country

Aliaxis S.A. Aliaxis Finance S.A. Aliaxis Holding B.V. Aliaxis Holding Italia Spa Aliaxis Holding U.K. Ltd Aliaxis Ibérica S.L. Aliaxis North America Inc Aliaxis Participations S.A. Aliaxis R&D S.A.S. Aliaxis Services S.A. Friatec Rheinhütte Beteiligungs GmbH GDC Holding Ltd Gepros S.A.S. Glynwed Dublin Corporation Glynwed Finance Canada LP Glynwed Finance LLC Glynwed Holding B.V. Glynwed Inc Glynwed Overseas Holdings Ltd Glynwed Pacific Holdings Pty Ltd Glynwed Properties Ltd Glynwed USA Inc GPS Holding Germany GmbH Headland Canada LP Marley European Holdings GmbH Marley Holdings New Zealand Ltd Marley Plastics Australia Holdings Pty Ltd Phetco (England) Ltd Société Financière des Etangs S.A. Société Financière du Souverain S.A. Straub Holding AG The Marley Company (NZ) Ltd Werran Manufacturing Ltd

100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

Brussels Brussels Venlo Zola Predosa Sevenoaks Madrid Toronto Paris Vernouillet Vernouillet Mannheim Sevenoaks Vernouillet Dublin St. John Wilmington Nieuwegein Wilmington Sevenoaks Adelaide Sevenoaks Wilmington Mannheim St. John Wunstorf Auckland Hallam Sevenoaks Brussels Brussels Wangs Amsterdam Bedford

Belgium Belgium The Netherlands Italy UK Spain Canada France France France Germany UK France Ireland Canada USA The Netherlands USA UK Australia UK USA Germany Canada Germany New Zealand Australia UK Belgium Belgium Switzerland The Netherlands UK

OPERATING COMPANIES Abuplast Kunststoffbetriebe GmbH Akatherm Benelux N.V. Akatherm FIP GmbH Akatherm International B.V. Arnomij B.V. Astore Valves & Fittings Srl Canplas Industries Ltd Canplas USA LLC

100.00 50.00 100.00 100.00 80.00 100.00 100.00 100.00

Rodental Wilrijk Mannheim Panningen Noordwijkerhout Genoa Barrie Denver

Germany Belgium Germany The Netherlands The Netherlands Italy Canada USA

HOLDING AND SUPPORT COMPANIES

p. 31

Company

% Participation

City

Country

Chemvin Plastics Ltd Dynex Extrusions Ltd Europlast Spa FIP Srl Friatec AG Friatec DPL S.A.S. Friatec Rheinhütte GmbH & Co Friatec Rheinhütte Pumps & Valves LLC Friatec SARL Girpi S.A.S. Glynwed AB Glynwed AG Glynwed A/S Glynwed B.V. Glynwed GmbH Glynwed Ltda Glynwed N.V. Glynwed Pipe Systems Ltd Glynwed S.A.S. Glynwed Srl Glynwed s.r.o. GPS Asia Pte Ltd GPS Ibérica S.L. GPS Malaysia Sdn Bhd Harrington Industrial Plastics LLC Hunter Plastics Ltd Innoge PEI Ipex de Mexico S.A. de C.V. * Ipex Inc Ipex USA LLC Jimten S.A. Marley Alutec Ltd Marley CR s.r.o. Marley Deutschland GmbH Marley Magyarország RT Marley New Zealand Ltd Marley Österreich GmbH Marley Pipe Systems (Pty) Ltd Marley Plastics Ltd Marley Polska Sp.zo.o Marley Properties Pty Ltd Material de Aireación S.A. Multi Fittings Corporation Nicoll Belgique S.A. Nicoll Peru S.A.* Nicoll Eterplast S.A.* Nicoll Italia Srl Paling Industries Sdn Bhd Philmac Pty Ltd Poliplast Sp.zo.o

100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 97.63 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 98.67 100.00 100.00 100.00 99.98 100.00 60.00 100.00 100.00

Auckland Auckland Santa Lucia Di Piave Casella Mannheim Nemours Wiesbaden Hampton Nemours Harfleur Solna Neuthausen Roskilde Willemstad Vienna Teresopolis Kontich Sevenoaks Mèze Milan Prague Singapore Sta Perpetua de Mogoda Jala Chino London Monaco Tlalnepantla Don Mills Wilmington Alicante Sevenoaks Prague Wunstorf Szekszard Manurewa Linz Sandton Sevenoaks Warsaw Hallam Okondo Wilmington Herstal Lima Buenos Aires Santa Lucia di Piave Selangor Darul Ehsan North Plympton Olesnica

New Zealand New Zealand Italy Italy Germany France Germany USA France France Sweden Switzerland Denmark The Netherlands Austria Brazil Belgium UK France Italy Czech Rep. Singapore Spain Malaysia USA UK Monaco Mexico Canada USA Spain UK Czech Rep. Germany Hungary New Zealand Austria South Africa UK Poland Australia Spain USA Belgium Peru Argentina Italy Malaysia Australia Poland

OPERATING COMPANIES

p. 32

Company

% Participation

City

Country

OPERATING COMPANIES Raccords et Plastiques Nicoll S.A.S. Redi HT Srl Redi Spa Rhine Ruhr Pumps & Valves (Pty) Ltd Riuvert S.A. Sanitaire Accessoires Services S.A.S. Sanit채rtechnik GmbH SCI Frimo SCI LAML SED Flow Control GmbH Sonac S.A.S. Straub Werke AG The Universal Hardware and Plastic Fact. Ltd Vigotec N.V. VKP GmbH WEFA Plastic Kunststoffverarbeitungs GmbH Zhongshan Universal Enterprises Ltd

100.00 100.00 100.00 74.90 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 51.00 50.00 100.00 100.00 51.00

Cholet Barbarano Zola Predosa Sandton Tibi Alicante St Laurent de Mure Eisenberg Nemours Nemours Bad Rappenau Argenton Ch창teau Wangs Kowloon Ternat Rennerod Attendorn Zhongshan City

France Italy Italy South Africa Spain France Germany France France Germany France Switzerland China Belgium Germany Germany China

* Companies not consolidated pursuant to Article 107 (full consolidation) of the Royal Decree of 30 January, 2001.

A P P EN D IX II C O M PAN IES C ONS OLIDATED BY THE E Q U I TY ME T HO D Company

% Participation

City

Country

Duratec - Vinilit S.A.

40.00

Santiago

Chile

p. 33

Appendix VI: Summary of Significant Accounting Policies Aliaxis S.A. (“the Company”) is a company domiciled in

operating policies. The consolidated financial statements

Belgium. The consolidated financial statements of the

include the Group’s share of the total recognised gains and

Company for the year ended 31 December 2004 comprise

losses of associates on an equity accounted basis, from the

the Company and its subsidiaries (together referred to as

date that significant influence commences until the date

“the Group”) and the Group’s interest in associates. The

that significant influence ceases. When the Group’s share

financial statements were approved and authorised for

of losses exceeds the carrying amount of the associate, the

issue by the directors on 12 April 2005.

carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate.

(a) Statement of compliance ( i i i ) Tr a n s a c t i o n s e l i m i n a t e d o n c o n s o l i d a t i o n

The consolidated financial statements have been prepared in accordance with Belgian Generally Accepted Accounting

Intra-group balances and transactions, and any unrealised

Principles, as defined in the Royal Decree of 30 January

gains arising from intra-group transactions, are eliminated

2001 relating to the consolidated accounts of business

enterprises.

Unrealised gains arising from transactions with associates

preparing

the

consolidated

financial

statements.

are eliminated to the extent of the Group’s interest in the enterprise.

(b) Basis of preparation The financial statements are presented in Euro, rounded to

(d) Foreign currency

the nearest thousand. They are prepared on the historical cost basis. The accounting policies have been consistently applied by Group enterprises.

(i) Foreign currency transactions

Transactions in foreign currencies are translated to Euro

at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to

(i) Subsidiaries

Euro at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised

Subsidiaries are those enterprises controlled by the

in the income statement.

Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its

(ii) Financial statements of foreign operations

activities. The financial statements of subsidiaries are included in the consolidated financial statements from the

The assets and liabilities of foreign operations, including

date that control commences until the date that control

goodwill and fair value adjustments arising on consolidation,

ceases.

are translated to Euro at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign

(ii) Associates

operations are translated to Euro at the average foreign exchange rates for the year. Foreign exchange differences

p. 34

Associates are those enterprises in which the Group has

arising on translation are recognised directly in equity; the

significant influence, but not control, over the financial and

share of the Group in these differences is included in the

Aliaxis

heading “Translation differences”. On disposal of a foreign

Annual Report 2004

(iv) Amortisation

operation, accumulated exchange differences are recorded in the income statement as part of the gain or loss on the

Amortisation is charged to the income statement on

sale.

a straight-line basis over the estimated useful lives of intangible assets. Goodwill is amortised from the date of initial recognition; other intangible assets are amortised

(iii) Exchange rates

from the date they are available for use. Goodwill on The major exchange rates against Euro used in 2004 were:

acquisitions is amortised over a period of 20 years as the Group’s view is that acquisitions are strategic investments

GBP CAD USD AUD NZD

Average 2004 0.679 1.617 1.244 1.690 1.873

2003 0.692 1.582 1.131 1.738 1.944

Period End 2004 2003 0.705 0.705 1.642 1.623 1.362 1.263 1.746 1.680 1.887 1.924

which extend beyond the limitation of a “five year horizon”. The estimated useful life of other intangible assets varies, up to a maximum of 5 years.

( f ) P r o p e r t y, p l a n t a n d e q u i p m e n t

(e) Intangible assets

(i) Owned assets

(i) Goodwill

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Goodwill arising on an acquisition represents the excess of the cost of the acquisition over the fair value of the net

(ii) Leased assets

identifiable assets acquired. Goodwill is stated at cost less accumulated amortisation and impairment losses.

Leases in terms of which the Group assumes substantially

Goodwill is expressed in the currency of the subsidiary to

all the risks and rewards of ownership are classified as

which it relates and is translated to Euro using the year-end

finance leases. Plant and equipment acquired by way of

exchange rate.

finance lease is stated at an amount equal to the lower of its fair value and the present value of the minimum lease

(ii) Research and development

payments at inception of the lease, less accumulated depreciation and impairment losses.

Expenditure on research and development activities, undertaken with the prospect of gaining new scientific or

(iii) Depreciation

technical knowledge and understanding, is recognised in the income statement as an expense as incurred.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful life of items of

(iii) Other intangible assets

property, plant and equipment. Land is not depreciated. The principal estimated useful lives are as follows:

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and

• buildings

25 - 50 years

impairment losses. Expenditure on internally generated

• plant, machinery and equipment

10 - 15 years

goodwill and brands is recognised in the income statement

• furniture and vehicles

5 - 10 years

as an expense as incurred.

p. 35

(iv) Repair and maintenance costs

(k) Impairment

Expenditure on repairs and maintenance which does not

The carrying amounts of the Group’s assets, other than

increase the future economic benefits of the asset to which

inventories and deferred tax assets, are reviewed at each

it relates is expensed as incurred.

balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment

(g) Other financial assets

loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable

Other financial assets are classified as non-current assets

amount. Impairment losses are recognised in the income

and have initially been revalued at their fair market value. A

statement.

reduction in value is recorded as from the year in which the recorded value shows a permanent diminution.

(i) Calculation of recoverable amount

The recoverable amount of the Group’s investments is

( h ) Tr a d e a n d o t h e r r e c e i v a b l e s

calculated as the present value of expected future cash flows, discounted at the original effective interest rate

Trade and other receivables are stated at their cost less

inherent in the asset. Receivables with a short duration are

impairment losses. An estimate is made for doubtful

not discounted.

receivables based on a review of all outstanding amounts

The recoverable amount of other assets is the greater of

at the year-end.

their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects

(i) Inventories

current market assessments of the time value of money and the risks specific to the asset. For an asset that does not

Inventories are stated at the lower of cost and net realisable

generate largely independent cash inflows, the recoverable

value. Net realisable value is the estimated selling price

amount is determined for the cash-generating unit to which

in the ordinary course of business, taking into account

the asset belongs.

obsolete, defective and slow-moving items. The cost of inventories is based on the first-in first-out

(ii) Reversal of impairment

principle or the weighted average cost method and includes expenditure incurred in acquiring the inventories and

An impairment loss in respect of an investment is reversed

incidental costs. In the case of manufactured inventories

if the subsequent increase in recoverable amount can be

and work in progress, cost includes raw materials, other

related objectively to an event occurring after the impairment

production materials, direct labour, other direct costs and an

loss was recognised.

appropriate share of fixed and variable overhead production

An impairment loss in respect of goodwill is not reversed

costs based on a normal level of activity.

unless the loss was caused by a specific external event of an exceptional nature that is not expected to recur, and the increase in recoverable amount relates clearly to the

(j) Cash and cash equivalents

reversal of the effect of that specific event. In respect of other assets, an impairment loss is reversed if

p. 36

Cash and cash equivalents comprise other investments

there has been a change in the estimates used to determine

and deposits which are acquired for the purpose of the

the recoverable amount.

temporary investment of surplus funds, and cash at banks

An impairment loss is reversed only to the extent that the

and in hand.

asset’s carrying amount does not exceed the carrying amount

Aliaxis

Annual Report 2004

that would have been determined, net of depreciation or

estimating the amount of future benefit that employees

amortisation, if no impairment loss had been recognised.

have earned in return for their service in the current and prior periods; that benefit is discounted and multiplied by the probability that the benefit will be paid to determine the

(l) Share capital

present value (the defined benefit obligation), and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on high quality corporate bonds (close to AAA credit rated bonds) that have maturity

(i) Repurchase of share capital

dates approximating the terms of the Group’s obligations. Repurchased shares are classified as Treasury shares and

These calculations are performed by qualified actuaries

presented as an investment, stated at cost.

using the projected unit credit method. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees

(ii) Dividends

is recognised as an expense in the income statement on a The consolidated accounts are prepared after accounting

straight-line basis over the average period until the benefits

for the proposed distribution of the profit of the Company,

become vested. To the extent that the benefits vest

whereas the accounts of those companies included in

immediately, the expense is recognised immediately in the

the consolidation are included before accounting for the

income statement.

distribution of profits.

In calculating the Group’s obligation in respect of a plan, to the extent that any cumulative unrecognised actuarial gain or loss exceeds 10% of the greater of the defined

(m) Minority interests

benefit obligation and the fair value of plan assets, that portion is recognised in the income statement over the

The amounts included as minority interests have been

expected average remaining working lives of the employees

calculated by reference to the financial statements of the

participating in the plan. Otherwise, the actuarial gain or

subsidiaries after restatements.

loss is not recognised. Where the calculation results in a benefit to the Group, the recognised asset is limited to the net total of any

(n) Employee benefits

unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

(i) Pension obligations (ii) Long term service benefits

The Group operates a number of pension plans throughout the world, the assets of which are generally held in separate

The Group’s net obligation in respect of long term service

trustee-administered

mostly

benefits, other than pension plans, is the amount of future

funded by payments from employees and by the relevant

benefit that employees have earned in return for their service

companies, taking account of the recommendations of

in the current and prior periods. The obligation is calculated

independent actuaries.

using the projected unit credit method and is discounted

funds. These

plans

are

to its present value and the fair value of any related assets Obligations for contributions to defined contribution

is deducted. The discount rate is the yield at the balance

pension plans are recognised as an expense in the income

sheet date on high quality corporate bonds (close to AAA

statement as incurred.

credit rated bonds) that have maturity dates approximating

The Group’s net obligation in respect of defined benefit

the terms of the Group’s obligations.

pension plans is calculated separately for each plan by

p. 37

(iii) Equity and equity-related compensation benefits

rewards of ownership have been transferred to the buyer. Turnover is stated net after deducting sales taxes, returns, rebates and other allowances, discounts for cash payment

Stock options allow Group employees to acquire shares of

and the transport cost of delivery to customers.

the Company. The option exercise price equals the market price of the underlying shares at the date of the grant and

(ii) Government grants

no compensation cost or obligation is recognised. When the options are exercised, equity is increased by the amount of

A government grant (capital subsidy) is recognised in the

the proceeds received.

balance sheet initially when there is reasonable assurance that it will be received and that the Group will comply with the conditions attached to it. Grants that compensate the

(o) Provisions

Group for expenses incurred are recognised as revenue in the income statement on a systematic basis in the

A provision is recognised in the balance sheet when (i) the

same periods in which the expenses are incurred. Grants

Group has a legal or constructive obligation as result of a

that compensate the Group for the cost of an asset are

past event, (ii) it is probable that an outflow of economic

recognised in the income statement as revenue on a

benefits will be required to settle the obligation, and (iii)

systematic basis over the useful life of the asset.

a reliable estimate of the amount of the obligation can be made. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax

(r) Expenses

rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(i) Operating lease payments

A provision for warranties is recognised when the underlying products or services are sold. The provision is based on

Payments made under operating leases are recognised in

historical warranty data and a weighting of all possible

the income statement on a straight-line basis over the term

outcomes against their associated probabilities.

of the lease. Lease incentives received are recognised in

A provision for restructuring is recognised when the Group

the income statement as an integral part of the total lease

has approved a detailed and formal restructuring plan, and the

expense.

restructuring has either commenced or has been announced publicly. Future operating costs are not provided for.

(ii) Acquisition-related and financing costs

Acquisition-related costs are capitalised in the balance sheet

( p ) Tr a d e a n d o t h e r p a y a b l e s

and recorded in the heading â&#x20AC;&#x153;Goodwillâ&#x20AC;? and are amortised over a period of 5 years. Costs relating to the financing of

Trade and other payables are stated at their cost.

the Group are recognised in the balance sheet initially as deferred charges and recorded in the income statement as financial charges over the effective duration of the loan.

(q) Revenue (s) Income tax (i) Goods sold and services rendered

Income tax on the profit or loss for the year comprises

p. 38

Revenue from the sale of goods (turnover) is recognised

current and deferred tax. Income tax is recognised in the

in the income statement when the significant risks and

income statement.

Aliaxis

Annual Report 2004

Current tax is the expected tax payable on the taxable

to investments in subsidiaries to the extent that they will

income for the year, using tax rates enacted or substantially

probably not reverse in the foreseeable future. The amount

enacted at the balance sheet date, and any adjustment to

of deferred tax provided is based on the expected manner

tax payable in respect of previous years.

of realisation or settlement of the carrying amount of assets

Deferred tax is provided using the balance sheet liability

and liabilities, using tax rates enacted or substantially

method, providing for temporary differences between

enacted at the balance sheet date.

the carrying amounts of assets and liabilities for financial

A deferred tax asset is recognised only to the extent that

reporting purposes and the amounts used for taxation

it is probable that future taxable profits will be available

purposes. The following temporary differences are not

against which the asset can be utilised. Deferred tax assets

provided for: goodwill not deductible for tax purposes, the

are reduced to the extent that it is no longer probable that

initial recognition of assets or liabilities that affect neither the

the related tax benefit will be realised.

accounting nor the taxable profit, and differences relating

A P P EN D IX V III INTANGIBLE ASSETS (€’ 000s)

(a)

(b)

(c)

ACQUISITION COST As at the beginning of the year Movements during the year: • Impact of change in consolidation scope • Acquisitions, including own produced fixed assets • Sales and disposals • Transfers from one heading to another • Exchange differences As at the end of the year DEPRECIATION AND AMOUNTS WRITTEN OFF As at the beginning of the year Movements during the year: • Impact of change in consolidation scope • Charge for the year • Sales and disposals • Transfers from one heading to another • Exchange differences As at the end of the year NET BOOK VALUE AT THE END OF THE YEAR

Concessions,

Advance

Patents, Licences, etc

Goodwill

Payments

Total

14,163

14,199

28,426

81 1,840 (28) 827 338 17,221

– – – – 114 14,313

– 445 – (64) – 445

81 2,285 (28) 763 452 31,979

(9,059)

(7,488)

–

(16,547)

(14) (1,992) 24 (165) (39) (11,245)

– (993) – – (14) (8,495)

– – – – – –

(14) (2,985) 24 (165) (53) (19,740)

5,976

5,818

445

12,239

p. 39

A P P EN D IX IX TANGIBLE ASSETS (€’ 000s) Land and Buildings (Heading IV A)

(a) ACQUISITION COST As at the beginning of the year Movements during the year: • Impact of change in consolidation scope • Acquisitions, including own produced fixed assets • Sales and disposals • Transfers from one heading to another • Exchange differences As at the end of the year (b) REVALUATIONS As at the beginning of the year Movements during the year: • Impact of change in consolidation scope • Recorded • Reversals • Exchange differences As at the end of the year (c)

Leasing and Other Similar Rights (Heading IV D)

Other Tangible Assets (Heading IV E)

Assets under construction and Advance Payments (Heading IV F)

Total

340,094

786,748

81,569

1,361

8,013

155

2,760

469

–

6,663 (2,723) 844 (1,081) 343,952

36,094 (29,420) 11,671 (1,838) 806,015

6,605 (6,119) 875 (510) 82,889

2,195 (706) (33) 92 2,909

1,296 (77) (684) (177) 8,371

3,829

–

3,829

– 168 – (90) 3,907

– – – – –

– 73 – (3) 70

– – – – –

– 241 – (93) 3,977

(64,779)

(994) (4,977)

–

(735,131)

(254) (6,792) – – 5,448 25 434 (65,918)

– – (153) (502) – – – – 706 77 26 654 (48) 106 (463) (4,642)

– – – – – – – –

(1,810) (66,253) – – 34,834 165 2,377 (765,817)

24,062

506,357

DEPRECIATION AND AMOUNTS WRITTEN OFF As at the beginning of the year (83,390) (580,991) Movements during the year: • Impact of change in consolidation scope (75) (1,481) • Charge for the year (8,287) (50,519) • Acquisition from third parties – – • Written back – – • Disposals 1,852 26,751 • Transfers from one heading to another (269) (271) • Exchange differences 262 1,623 As at the end of the year (89,907) (604,888)

(d) NET BOOK VALUE AT THE END OF THE YEAR Detail: • Land and buildings • Plant, machinery and equipment • Furniture and vehicles

p. 40

Plant, Machinery and Furniture Equipment and Vehicles (Heading (Heading IV B) IV C)

257,952

201,127

16,971

2,446

2,110 54 282

3,799

18,629 1,236,414 4

3,388

19,065 71,918 (92) (39,137) (13,436) (763) (108) (3,622) 24,062 1,268,197

Aliaxis

Annual Report 2004

A P P EN D IX X FINANCIAL ASSETS (€’ 000s)

Companies Associated

Other

PARTICIPATIONS, SHARES AND INVESTMENTS (a) ACQUISITION COST As at the beginning of the year Movements during the year: • Impact of change in consolidation scope • Acquisitions • Disposals • Exchange differences • Share of the results of the year • Dividends received As at the end of the year (c)

28,942

– – – (275) 1,123 (135) 11,849

(348) 629 (15,337) (30) – – 13,856

–

(2,791)

– –

(310) (3,101)

11,849

10,755

WRITE DOWNS As at the beginning of the year Movements during the year: • Recorded As at the end of the year NET BOOK VALUE AT THE END OF THE YEAR

11,136

RECEIVABLES Net book value at the beginning of the year Movements during the year: • Impact of change in consolidation scope • Additions • Reimbursements • Exchange differences • Transfer from one heading to another

–

7,641

– – – – –

(3,889) 775 (9) (25) 987

NET BOOK VALUE AT THE END OF THE YEAR

–

5,480

p. 41

A P P EN D IX XI RESERVES AND RETAINED EARNINGS (€’ 000s)

2004

As at the beginning of the year Movements during the year: • Profit for the year • Dividend declared As at the end of the year

516,678 60,843 (12,560) 564,961

A P P EN D IX X II CONSOLIDATION DIFFERENCES (€’ 000s)

Subsidiaries Positive differences

Net book value at the beginning of the year Movements during the year: • Amortisation • Exchange differences Net book value at the end of the year

524,132 (35,800) (4,682) 483,650

A P P EN D IX XIII AMOUNTS PAYABLE (€’ 000s)

DEBTS (OR PART OF DEBTS) Payable within Payable between Payable after 1 year 1 and 5 years 5 years

ANALYSIS OF AMOUNTS ORIGINALLY PAYABLE AFTER ONE YEAR, AS A FUNCTION OF THEIR RESIDUAL TERM Financial Debts • Unsubordinated debentures • Leasing and other similar obligations • Credit institutions • Other loans Other amounts payable TOTAL

p. 42

56,551 – 433 55,161 957

594,886 20,000 1,498 572,478 910

1,053 – 628 64 361

–

104

–

56,551

594,990

1,053

Aliaxis

Annual Report 2004

A P P EN D IX XIV TURNOVER ANALYSIS AND PERSONNEL COSTS (€’ 000s) A.

NET TURNOVER By industrial activity: Gravity systems Pressure systems Other building products Other TOTAL By geographical area: Europe of which Belgium

North America South America Asia and Australasia Africa TOTAL

B. 633,291 559,775 236,440 250,259 1,679,765

920,842

PERSONNEL AND PERSONNEL CHARGES Average number of personnel (in units): • Production • Administration • Management TOTAL of which Belgium

Personnel charges Post-employment employee benefits

6,863 4,221 526 11,610 106

426,370 26,170

29,625

531,242 14,400 149,544 63,737 1,679,765

A P P EN D IX XV RIGHTS AND COMMITMENTS NOT REFLECTED IN THE BALANCE SHEET (€’ 000s) A.

4 5

Personal guarantees given or irrevocably promised by companies included in the scope of the consolidation as security for debts or commitments of third parties Real guarantees on own assets given or irrevocably promised by companies included in the scope of the consolidation as a security, respectively, for debts and commitments a) Commitments to acquire fixed assets a) Rights resulting from operations relating to: • Interest rates • Exchange contracts

961,600

8,750 1,251 419,570 17,178

Warranty provisions

p.m.

Litigation and other commitments

p.m.

p. 43

A P P EN D IX X VI

RELATIONSHIP WITH NON-CONSOLIDATED COMPANIES (€’ 000s) 1

p. 44

FINANCIAL FIXED ASSETS • Investments • Loans FINANCIAL RESULTS • Income - from financial assets

Affiliated companies

10,753 2,213

116

Aliaxis

Annual Report 2004

Au d i t o r ’s r e p o r t Statutory Auditor’s Report on the consolidated accounts

examined on a test basis, the evidence supporting the

for the year ended 31 December 2004 submitted to the

amounts included in the consolidated financial statements.

General Shareholders’ Meeting of Aliaxis S.A.

We have assessed the accounting policies used, the basis for consolidation and the significant accounting estimates

In accordance with legal and statutory requirements, we are

made by the Company and the overall presentation of the

reporting to you on the completion of the mandate which

consolidated financial statements. We believe that our audit

you have entrusted to us.

and the reports of the other auditors provide a reasonable basis for our opinion.

We have audited the consolidated financial statements for the year ended 31 December 2004 with a balance sheet

In our opinion, based on our audit and the reports of the

total of €1,726,787,000 and a consolidated profit for the year

other auditors, the consolidated financial statements of

(Group share) of €60,843,000. These consolidated financial

Aliaxis S.A. for the year ended 31 December 2004 present

statements have been prepared under the responsibility

fairly the financial position of the Group and the consolidated

of the Board of Directors of the Company. The financial

results of its operations, in conformity with the legal and

statements of a number of companies, which statements

regulatory requirements prevailing in Belgium, and the

reflect total assets of €69,456,000 and total revenues of

disclosures made in the notes to the consolidated financial

€137,602,000 in the consolidated financial statements

statements are adequate.

were audited by other auditors, whose reports have been furnished to us, and our opinion is based solely on the reports of the other auditors. In addition we have reviewed

Additional assertion

the Directors’ Report. The consolidated Directors’ Report contains the information

Unqualified audit opinion on the

required by law and is in accordance with the consolidated

consolidated financial statements

financial statements.

Our audit was performed in accordance with the standards of the Institut des Reviseurs d’Entreprises-Instituut der Bedrijfsrevisoren. Those standards require that we plan and

Brussels, 12 April 2005

perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of

Klynveld Peat Marwick Goerdeler

material misstatement, taking into account the Belgian legal

Bedrijfsrevisoren – Reviseurs d’Entreprises

and regulatory requirements relating to the consolidated

Statutory Auditor

financial statements.

represented by

In accordance with these standards we have considered the administrative and accounting organisation of the Group as well as the system of internal control. The Group’s management has provided us with all explanations and

Benoit Van Roost

information which we required for our audit. We have

Reviseur d’Entreprises

p. 45

N O N- CON SO LIDATED AC C OUNTS AN D P RO F I T DI ST R I B U T I O N

The annual statutory accounts of Aliaxis S.A. are summarised below. In accordance with the Belgian Company Code, the annual accounts of Aliaxis S.A., including the Directors’ Report and the Auditor‘s Report, will be registered at the Belgian National Bank within the required legal timeframe. These documents shall also be available upon request at : Aliaxis S.A. Group Finance Department Avenue de Tervueren, 270 1150 Brussels, Belgium The Auditor has expressed an unqualified opinion on the annual statutory accounts of Aliaxis S.A

S U M MARISED B AL ANC E S HEET AFT E R P RO F I T DI ST R I B U T I O N ASSETS (€’ 000s) FIXED ASSETS Intangible assets Tangible assets Financial assets CURRENT ASSETS TOTAL ASSETS

At 31 December 2004

At 31 December 2003

813,021 52 311 812,658

812,519 48 334 812,137

2,429

9,478

815,450

821,997

At 31 December 2004

At 31 December 2003

791,318 62,444 10,972 92 297,167 420,643

794,545 62,387 10,364 92 296,696 425,006

700

23,432

27,452

815,450

821,997

EQUITY AND LIABILITIES (€’ 000s) CAPITAL AND RESERVES Capital Share premium account Revaluation reserve Reserves Profit carried forward PROVISIONS CREDITORS TOTAL EQUITY AND LIABILITIES

p. 46

Aliaxis

Annual Report 2004

S U M MARISED PROFIT AND LOS S AC C O U N T

YEAR ENDED 31 DECEMBER (€’ 000s)

2004

2003

2,147 (7,423)

3,527 (9,592)

(5,276) 14,707 -

(6,065) (114) -

(4)

PROFIT / (LOSS) FOR THE PERIOD

9,427

(6,179)

PROFIT / (LOSS) FOR THE PERIOD AVAILABLE FOR APPROPRIATION

9,427

(6,179)

Income from operations Operating charges OPERATING LOSS Financial result Extraordinary result INCOME TAXES

P ROFIT DISTRIB UTION

The Board of Directors will propose at the General

The profit appropriation would be as follows:

Shareholders’ Meeting on 25 May 2005 a net dividend of € 0.11 per share. The proposed gross dividend is € 0.1467, representing 13.3% of the consolidated net current profit (Group share) of € 1.10 per share. The dividend will be paid on 1 July 2005 against the return of coupon No. 2 at the following premises:

(€’ 000s) Profit brought forward Profit for the period

425,006 9,427

Profit available for distribution

434,433

Gross dividend to be distributed to the 90,812,415 issued shares

(13,319)

- Banque Degroof - Fortis Banque - Dexia Banque - Crédit Agricole Indosuez Luxembourg as well as at our registered office.

Legal reserve Profit carried forward

(471) 420,643

p. 47

Aliaxis Trading Companies Worldwide Europe Austria Belgium

Bulgaria Czech Republic Denmark France

Germany

Greece Hungary Italy

Lithuania Monaco Netherlands

Norway Poland Romania Russia Serbia/Montenegro Slovakia Spain

p. 48

Glynwed GmbH Marley Österreich GmbH Akatherm Benelux NV Glynwed NV Nicoll Belgique SA Vigotec NV Glynwed EOOD Glynwed sro Marley CR sro Glynwed A/S Friatec SARL Girpi SAS Glynwed SAS Nicoll SAS Sanitaire Accessoires Services SAS Abuplast Kunststoffbetriebe GmbH Akatherm FIP Friatec AG Marley Deutschland GmbH Sanitärtechnik GmbH SED Flow Control GmbH VKP GmbH Wefa Plastic GmbH Nicoll EPE Glynwed Kft Marley Magyarország Rt AVF Astore Valves & Fittings Srl Europlast Spa FIP Srl Glynwed Srl Nicoll Italia Srl Redi HT Srl Redi Spa Glynwed UAB Innoge PEI Akatherm International BV Arnomij BV Glynwed BV Glynwed A/S Marley Polska sp.zo.o Poliplast sp.zo.o Glynwed Romania SRL Glynwed Pipe Systems Glynwed GmbH Glynwed sro GPS Ibérica S.L. Jimten SA Masa

www.glynwed.at www.marley.at www.akatherm.be www.glynwed.be www.nicoll.be www.vigotec.be www.glynwedpipesystems.com www.glynwed-cz.com www.marley.cz www.glynwed-dk.com www.friatec.fr www.girpi.fr www.glynwed.fr www.nicoll.fr * www.abu.de www.akatherm-fip.de www.friatec.de www.marley.de www.sanit.de www.sed-flowcontrol.com www.rheinhuette.de www.wefaplastic.com www.nicoll.com www.glynwed.hu www.marley.hu www.astore.it www.europlast.it www.fipnet.it www.glynwed.it www.nicoll-italia.com www.redi.it www.redi.it www.glynwed.lt www.innoge.com www.akatherm.com www.arnomij.nl www.glynwed.nl www.glynwed-no.com www.marley.com.pl www.poliplast.pl www.glynwed.at www.glynwed.ru www.glynwed.at www.glynwed.sk www.glynwed.es www.jimten.com www.masa.es

Aliaxis

Annual Report 2004

Riuvert SA Glynwed AB Glynwed AG Straub Werke AG Dairy Pipe Lines GPS PE Piping Systems Durapipe UK Greenwood Air Management Hunter Plastics Ltd Marley Alutec Ltd Marley Plumbing & Drainage Multikwik Stainless Fittings

www.riuvert.es www.glynwed.se www.glynwed.ch www.straub.ch www.dpluk.co.uk www.gpsuk.com www.durapipe.co.uk www.greenwood.co.uk www.hunterplastics.co.uk www.marleyalutec.co.uk www.marleyplumbinganddrainage.com www.multikwik.com www.dpluk.co.uk

United States

Canplas Industries Ltd Hamilton Kent Ipex Inc Canplas USA LLC Friatec Rheinhütte Pumps & Valves LLC Harrington Industrial Plastics LLC Ipex USA LLC

www.canplas.com www.hamiltonkent.com www.ipexinc.com www.canplas.com www.friatec-rheinhutte.com www.harringtonplastics.com www.ipexinc.com

Argentina Brazil Chile Mexico Peru

Nicoll Eterplast SA Glynwed Ltda Duratec Vinilit SA Ipex de México SA de CV Nicoll Peru SA

www.nicoll.com.ar www.glynwed.com.br www.duratec.cl www.ipexinc.com www.nicoll.com.pe

Australia China

Philmac Pty Ltd Universal Hardware and Plastic Fact. Ltd Zhongshan Universal Enterprises Ltd Glynwed Pipe Systems (Asia) Glynwed Pipe Systems (M) SDN BHD Paling Industries SDN BHD Chemvin Plastics Ltd Dynex Extrusions Ltd Marley New Zealand Ltd GPS Asia Pte Ltd Glynwed Pipe Systems (Asia)

www.philmac.com.au www.anchorhk.com www.anchorhk.com www.glynwedchina.com www.glynwedasia.com www.paling.com.my www.chemvin.co.nz www.dynex.co.nz www.marley.co.nz www.glynwedasia.com www.glynwedasia.com

Marley Pipe Systems (Pty) Ltd Rhine Ruhr Pumps & Valves (Pty) Ltd

www.marleypipesystems.co.za www.rrpumps.co.za

Sweden Switzerland United Kingdom

North America Canada

South America

Asia and Australasia

Malaysia New Zealand

Singapore Thailand Africa South Africa

* Note: Details of those businesses without their own web-sites can be found via the Aliaxis web-site, www.aliaxis.com.

p. 49

Glossary of Key Terms and Ratios

Tu r n o v e r ( N e t S a l e s )

Capital Expenditure

Amounts invoiced to customers for goods and services

Expenditure on the acquisition of tangible and intangible

provided by the Group, less credits for returns, rebates and

assets, excluding business acquisitions

allowances, discounts for cash payments and the transport cost of delivery to customers

Net Financial Debt

The aggregate of (i) long-term and short-term financial debts O p e r a t i n g I n c o m e ( E B I TA )

including financial leases and similar obligations, less (ii)

Income after all operating charges, but before the financial

deposits and cash at bank and in hand (excluding Treasury

result, the extraordinary result, goodwill amortisation and

shares)

income taxes Capital Employed Operating Cash Flow (EBITDA)

The aggregate of goodwill, tangible and intangible assets

Operating Income before charging depreciation on tangible

and Non-Cash Working Capital

and intangible assets Non-Cash Working Capital Net Profit (Group Share)

Current assets (inventories, trade receivables, other amounts

Groupâ&#x20AC;&#x2122;s share of consolidated profit after taxes, results of

receivable and deferred charges & accrued income), less

associated companies and minority interests

current liabilities (trade payables, other amounts payable, taxes, remuneration & social security and accrued charges

Net Current Profit (Group Share)

& deferred income), but excluding deposits, cash and

Net Profit before the extraordinary result (net of taxes) and

financial debts

before goodwill amortisation Return on Capital Employed (%) Net Current Cash Flow (Group Share)

Operating Income

Average of Capital Employed at 1

Net Current Profit before charging depreciation on tangible

January and 31 December * 100

and intangible assets Current Return on Equity (Group Share) (%) Net Profit/Net Current Profit/Net Current

Net Current Profit (Group Share) / Average of Capital and

Cash Flow per Share

Reserves at 1 January and 31 December * 100

Calculated using the weighted average number of Aliaxis shares in issue during the year E f f e c t i v e I n c o m e Ta x R a t e ( % )

Income Taxes (excluding taxes on the extraordinary result) / Operating Income plus the financial result * 100 Current Distribution Rate (%)

Gross dividend per share Share) * 100

p. 50

Net Current Profit (Group

Key Figures

Aliaxis

Net Current Profit (Group Share) * Net Current Cash Flow (Group Share) * Net Profit (Group Share) * Gross Dividend Net Dividend Current Distribution Rate *

2004 € million

2003 € million

1,680 267 15.9% 199 11.8% 61 100 167 74 109% 574 659 14.1% 16.2% 11,610

1,612 247 15.3% 179 11.1% 43 80 148 58 85% 536 720 13.5% 16.8% 12,049

2004 € per share

2003 € per share

1.10 1.84 0.67 0.1467 0.11 13%

0.89 1.63 0.47 0.133 0.10 15%

Annual Report 2004

Aliaxis: a worldwide business… … with strong local brands

* Defined in Glossary on Page 50

Analysis of turnover By geographical Area Asia/Australasia: 9%

By Industrial Activity

agenda

Africa: 4% Other Building Products: 14%

South America: 1%

Other: 15%

F ir st ha lf 2 0 05 resu lts

- Wednesday 25 May 2005

- Board Meeting to approve results: September 2005

At the Group’s Registered Office, Avenue de Tervueren, 270,

- Press Announcement: September 2005

B-1150 Brussels, Belgium

Pressure Systems: 33%

North America: 31%

A nnua l Ge ne r a l Sha r e holde r s ’ Me e t ing

Full y e a r 2 0 05 resu lts

Europe: 55%

Gravity Systems: 38%

Pa y me nt of D i v ide nd

- Board Meeting to approve results: April 2006

- Friday 1 July 2005

- Press Announcement: April 2006

Realisation: Comfi&Publishing - 02/290 90 90

Aliaxis

Annual Report 2004

Registered Office Aliaxis S.A. Avenue de Tervueren, 270 B-1150 Brussels, Belgium

Aliaxis - annual report 2004

Ta b l e o f C o n t e n t s

Table of Contents

Key Figures

Chairman’s Statement

Company Profile

Corporate Governance

Directors’ Report on the Consolidated Accounts

Introduction

Economic Environment and Key Features

Review of Business Activities

Research and Development

Environmental Review

Human Resources

Financial Review

Oulook for 2005 and Subsequent Events

Financial Data

Annual Report 2004

Consolidated Accounts

Auditor’s Report

Non-Consolidated Accounts and Profit Distribution

Aliaxis Companies Worldwide

Glossary of Key Terms and Ratios

No. Entreprise: 0860 005 067 Tel : +32 2 775 50 50 - Fax : +32 2 775 50 51 Web-site : www.aliaxis.com E-mail address: aliaxis@aliaxis.com